Rental slavery replaces wage slavery

So I happen upon this site www.insurgentamerican.net, and while the politics can get a little lefty for my tastes (I'm neither left nor right, I'm "Leave me alone"), there's and incredibly thoughtful pdf on that site about how we got into the credit crisis we did.

Short version of the story is that we put ourselves in the crunch by buying into something we should never have. In short, everybody wanted to become Petit-bourgeoisie by becoming landowners. Those that had the means were making money without working by renting property to those who couldn't afford to buy. The article refers to them as rentiers. The rentier class makes money for free, after the costs are paid for: mortgage, taxes, upkeep. This is how fatcat landlords become fat.

The problem is that banks make money on long term investments like mortgages, so they have an interest in getting more debtors owning land and assets under mortgage or as security for loans. So began the two-pronged attack - make more homeowners through predatory lending, and hook them into a cycle of debt when the bubble collapses. So credit became a drug, people could borrow on interest onlys, negative amoritization, and zero downs. Folks could make money renting off lots to others, and since all land appreciates, everybody would be leisure class, living the rentier lifestyle of making money from nothing.

Of course, the bubble has to burst at some point, and it did. The problem was that the Fed kept pushing interest rates down to combat inflation, adding more cheap money to an already flooded economy. Everybody's property value soared, disguising the fact that that price reflected speculation and hid the declining value of the dollar. Wealth moved to real estate, and the fallout was that homebuilders built, rentiers bought on credit, and eventually no one but rentier class could afford a house. Then the bottom dropped out.

This who scenario happened once before, in the 1920's, as the Fed made cheap money available and the rentier hopefuls looked to the Stock Market as the source of free money. We all know how that bubble burst, and we are living the early stages of it again, only this uses our houses as collateral.

The road to serfdom.

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This comes courtesy of my brother, and the AP.

Shiller: Housing slump may exceed Depression

Bailouts will be needed so millions don't lose homes, top economist says

NEW HAVEN, Conn. - An influential economist who long predicted the housing market bubble cautioned Tuesday that the slump in the U.S. housing market could cause prices to fall more than they did in the Great Depression, and bailouts will be needed so millions don't lose their homes.

Yale University economist Robert Shiller, pioneer of the widely watched Standard & Poor's/Case-Shiller home price index, said there's a good chance housing prices will fall further than the 30 percent drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15 percent since their peak in 2006, he said.

"I think there is a scenario that they could be down substantially more," Shiller said during a speech at the New Haven Lawn Club.

Shiller's Standard & Poor's/Case-Shiller home price index is considered a strong measure of home prices because it examines price changes of the same property over time, instead of calculating a median price of homes sold during the month.

Shiller, who admitted he has a reputation for being bearish, said real estate cycles typically take years to correct.

Home prices rose about 85 percent from 1997 to 2006 adjusted for inflation, the biggest national housing boom in U.S. history, Shiller said.

"Basically we're in uncharted territory," Shiller said. "It seems we have developed a speculative culture about housing that never existed on a national basis before."

Many people became convinced that housing prices would increase 10 percent annually, a notion Shiller called crazy.

Shiller, who said it's difficult to forecast prices, endorsed legislation proposed by Sen. Chris Dodd, D-Conn., and Rep. Barney Frank, D-Mass., that would allow the Federal Housing Administration to back as much as $300 billion in mortgages for struggling homeowners.