[Marxism] Greenspan on the housing bubble (from LMD)

[Walter Lippmann <walterlx@xxxxxxxxxxxxx>]

   Le Monde diplomatique 
   -----------------------------------------------------

   January 2009

      `FEW EXPERTS WARNED THIS WEALTH WAS NOT REAL BUT VIRTUALÂ

                           Greenspan's view

     In his book The Age of Turbulence. Adventures in a New World
     (Penguin, New York, 2007) Alan Greenspan justifies his action
     in support of the property boom (p. 233): "I was aware that
     the loosening of mortgage credit terms for subprime borrowers
     increased financial risk, and that subsidised home ownership
     initiatives distort market outcomes. But I believed then, as
     now, that the benefits of broadened home ownership are worth
     the risk. Protection of property rights, so critical to a
     market economy, requires a critical mass of owners to sustain
     political support."

     He says too: "By early 2003, thirty-year mortgages were below
     6 percent, the lowest they'd been since the sixties.
     Adjustable-rate mortgages cost even less. This spurred the
     turnover of houses that drove prices higher. Since 1994, the
     proportion of American households who became homeowners had
     accelerated. By 2006, nearly 69 percent of households owned
     their own home, up from 64 percent in 1994 and 44 percent in
     1940.

     "The gains were especially dramatic among Hispanics and
     blacks, as increasing affluence as well as government
     encouragement of subprime mortgage programmes enabled many
     members of minority groups to become first-time home buyers.
     This expansion of ownership gave more people a stake in the
     future of our country and boded well for the cohesion of the
     nation, I thought. Home ownership resonates as deeply today
     as it did a century ago. Even in a digital age, brick and
     mortar (or plywood and Sheetrock) are what stabilise us and
     make us feel at home" (pp. 229-230).

     He reminds us that, according to The Economist, "between 2000
     and 2005, the market value of residential property in
     developed nations rose from $40 trillion to more than $70
     trillion. The largest share of that increase - $8 trillion -
     occurred in US single-family homes" (p 231).


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   <http://MondeDiplo.com/2009/01/18greenspan>


=========================================
     WALTER LIPPMANN
     Havana, Cuba
     Editor-in-Chief, CubaNews
     http://groups.yahoo.com/group/CubaNews/
     "Cuba - Un ParaÃso bajo el bloqueo"
=========================================

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