Lehman Brothers

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Lehman Brothers
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It's a very good article on Lehmans and the 2008 "crash" that distinctly echoes the growing concerns of the bourgeosie about the fundamentals of its further lurch into economic crisis, a crisis which the article makes clear did not begin with Lehman's, nor 2008 and it certainly won't end with either.

One point that was new to me was the sheer scale of expulsions and evictions of workers from their homes; seven-and-a-half million and for most of them, conned out of what savings they had, after the initial trauma their problems were only beginning. During the late 1980's (I'm not entirely sure of the exact dates), the council estate that I'd lived on for decades comprised of many workers that had been convinced to buy their homes often on potentially dangerous "interest-only" rates. When the housing mini-bubble collapsed many of these, including the people next door and several more families just a stone-throw away, were left in various stages of distress with the next-door neighbour who was sick taken out to a van in middle of the night laying on a door while his wife came back and put the keys in the letterbox. But, unlike Lehmans later, they were still being pursued years afterwards for the monies that they legally owed the banks. Then about 12 years later, after a "rise" in house prices the bubble burst again and more workers' families around me were once again devastated by an apparantly out-of-the-blue catastophe which was rather an economic swindle mediated by the banks and building societies and overseen by the state.

Interesting piece, but I

Interesting piece, but I wonder how to explain the evolution of the economy in the years since the so-called "Great Recession." In the early 2000s, it was obvious to anyone who cared to look that the post 9-11 economy was being propped up by the absurd upward spiral in house prices, a form of so-called "privatized Keynesianism" that was fueling all kinds of economic activity, from loan making (many people were taking a piece of this action, whether as loan brokers, real estate agents, closing attorneys, etc.) to blue collar and immigrant workers thriving on home construction and home renovations, to people just using their homes as giant ATMS to fuel all kinds of conspicuous consumption. The absurdity of this situation was shown in the film "The Big Short," in which a Wall Street Investor, in an effort to find if this was all a huge bubble about to burst, interviews an exotic dancer, who tells him she owned six houses. But such was the ethos of the time, you were an idiot if you didn't get in on the game. Houses only appreciate.

Of course, that wasn't true and the proliferation of questionable financial products the article describes eventually caused the entire house of cards to collapse. Home prices crashed, loans were called in, millions were evicted, the Obama administration bailed out the banks (Lehman was left to die in the waning month of the W. Bush administration, which was generally regarded as a mistake ), but left homeowners to stew in their own juice. It was an all around international crisis when the contagion spread to Europe.

But fast forward ten years and home prices in most major US markets are just as high as they were at the height of the bubble, if not more so, and there are much fewer "risky loans," out there. (Interestingly in Canada, where the mortgage market was much more tightly regulated throughout the period in question, the real estate market never crashed). Most experts tell us that although home prices are skyrocketing in any metropolitan area where there might be a job, rendering it almost impossible for most millenials to buy a home, there is no bubble. Home prices are tracking with rent and banks haven't made the kind of "liar loans" that nearly did in the world economy in over a decade. While home prices escalation may eventually slow or even reverse, there will be no systemic crisis like last time.

Even as storm clouds appear to gather over the world economy and Trump roils markets with his public challenging of his own Fed Chairman over interest rate hikes (putting him on the same side as "progressive" economic think tanks), there is little concern that a bursting housing bubble will pose a global risk anytime soon.

So how do we explain the recovery of housing prices in the last decade (at least in geographic areas that continue to function in the neo-liberal order of things)? Is there a hidden asset bubble again, or is this more a new structural feature of neo-liberalism: the progressive bifurcation of geography into a burgeoning metro region, with job and cultural opportunities for millenials (an atmosphere of performative wokeness), but where the cost of living (particularly housing) is increasingly out of reach and a depressed "heartland," where housing prices are cheap, but they don't appreciate much, people are "asset poor," and there are few jobs for educated young people?