Re: Shiller on housing bubble

[Marvin Gandall <marvgandall@xxxxxxxxxx>]

Sam Ginden wrote:

When the housing bubble bursts, there will be some pain, unevenly felt (some
may even find they can afford the lower price of home) and there will be
some 'adjustments' in the economy, some perhaps quite stabilizing (though
this too will lead to some responses from the fed to ameliorate, to the
extent it can, the depth of the crisis. But what more are people expecting
than a semi-crash or a recession? Are people on the left arguing that a
serious economic collapse and turning point in capitalism is imminent (Or
only that we're in for a roller-coaster of a ride and some retructuring)?
That a new movement will emerge out of this (rather than a working class
intent to just get back to 'the good-old days' even if it means some
concessions)?
My own take is that in the absence of a working class already strong enough
to limit the options facing capital and the state, the crisis will be
limited...
-------------------------------
Greetings, Sam. How can we know one way or another? Who can say how far
things will unwind? I'm not a catastrophist, and have also become jaded by
the left's perrenial Cassandra cries. So I look to the financial press as a
better barometer, and what I see there is high anxiety about the potential
for a worldwide crash resulting from the collapse of the bubble in the US
and other inflated property markets. That impresses me, as does the fact
that direct mass exposure to real estate is much wider and deeper than it
was and is to stocks.

Beyond that, I suppose the only things we can say with some confidence is
that there would first be an attempt at recovery through normal monetary and
fiscal measures, and if these don't work and we spiral down into depression,
there would be a resort to more radical measures, including restructuring -
foremost of which would be nationalization and consolidation of the banks to
restore lost credit, and public employment programs of various kinds to
restore lost jobs and incomes.  Maybe we would even get some movement on
home and day care, public transit, the environment, and other social needs
which tend to be seriously addressed only during depressions to restore
purchasing power and stem social unrest. But only if the crisis can't be
contained by conventional means, and provided, of course, there is not a
wholesale collapse of fiat money.

I think social protest would be very likely in these circumstances. It
always starts with people wanting to get back to the "good old days", and if
they can't accomplish that through their existing parties, unions, and other
institutions, they build new ones. And if turns out their new organizations
can't reform liberal capitalism, they pay more serious attention to those -
on both left and right -calling for its overthrow and replacement with
something different. I don't think you take into account how quickly popular
consciousness and behaviour can change in a crisis when you assert "that in
the absence of a working class already strong enough to limit the options
facing capital and the state, the crisis will be limited..." You could have
said the same thing in the 20's about the largely unorganized US working
class before the rise of the CIO. Who would have predicted the collapse of
the USSR and Eastern bloc in such unexpected short order?

Mass militancy does not equate to social revolution, however, a progession
which is sometimes casually assumed on the left. In most cases, militancy is
stopped short by significant reform or repression or a combination of both.

You can also have a serious downturn bordering on collapse which isn't
accompanied by any serious mass unrest. Take Japan, which is the most recent
example of a burst bubble threatening to spill over into a full-fledged
economic crisis. There the state and BOJ were able to run massive deficits,
prop up zombie corporations and ailing banks, find a new market in China,
and prevent unemployment and personal bankruptcies from soaring into the
double digits - triggering unrest. Maybe that's more what you have in mind.

So: 1) "Who knows?", and 2) "It all depends..."

Marv