Who Stole The Chairs?

So who is to blame for the mess we are in? Victor Davis Hanson has some thoughts on the subject.

no one dares to ask what really drove the wheeler-dealer portfolio managers. Who re-elected these shady politicians of both parties? Who fostered the cash-in culture in which both Wall Street profit mongering and Washington lobbying are nourished and thrive? We citizens did — red-state conservatives and blue-state liberals, Republicans and Democrats, alike. We may be victims of Wall Street greed — but not quite innocent victims.
Let me explain. The profiteering was not just the result of a few thousand scoundrels on Wall Street or in Washington, as greedy and as bonus-hungry as many of them no doubt were. Look at the housing market as a sort of musical chairs in which everyone profited as long he grabbed a seat when the music stopped. Then those left standing — with high-priced loans and negative equity when the crash came — defaulted and stuck taxpayers with debt in the billions of dollars. But until then, most owners who had sold homes cashed out beyond their wildest dreams.
Thousands of dollars in past profits are still in sellers’ bank accounts or were spent on their own consumption. If the shaky buyer at the bottom of the pyramid should not have borrowed to buy an overpriced house, then the luckier seller higher up hardly worried that the cash-strapped fool was paying him way too much with unsecured borrowed money.
We created the cultural climate for this shared madness. Television shows advised how to “flip” a house after putting in cosmetic improvements. Real-estate seminars and popular videos convinced us that homes were not places to live in and raise a family but rather no different from piles of chips on a Vegas table.
We created the phony populist creed that everyone deserved to own a house. So lawmakers got the message to relax lending standards in service to “fairness.” But Americans forgot that historically nearly four in 10 of us aren’t ever ready, or able, to sacrifice for a down payment, monthly mortgage bills, home maintenance and yearly taxes — and so should stick to renting.

I’m one of those 4 in 10. And you know what? I’m renting. I may have no assets but my liabilities are limited as well. Call it a form of reverse security. If my income goes down I can move to cheaper digs. What can a home owner do when the market tanks and his income goes down? Marx had a term for it: Stucco. That would be Groucho not Karl.
Cross Posted at Power and Control


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3 responses to “Who Stole The Chairs?”

  1. Assistant Village Idiot Avatar

    Fifteen years ago baseball card and comic book values were rising at amazing rates every year, and collectors made significant profits flipping those. I was never tempted to that, sensing somehow that there was no increase in intrinsic value of these items, just inflated value of overexcited collectors. It all crashed, but I was unaffected except for a friend owning a comics store.
    Perhaps when people talk about flipping anything – buying, touching up, and reselling – we should recognise it as an industry that has reached its height and must crash shortly.

  2. Bobnormal Avatar
    Bobnormal

    Simon.I am a renter as well,And could certainly bought a home during this five year or so run up in easy financing etc.But I could seet his coming a mile away,and stayed out of it.
    My reward? My(and your)tax dollars given away to bail out people who couldn’t or wouldn’t see the risk and act in a responsible manner,what a shame….
    Bob

  3. Bob Smith Avatar
    Bob Smith

    “Buy, fix, and resell” creates value, and is therefore valid in any market. It’s when you flip without creating value in between that bubbles are born.