by Jennie S. Bev
The United States is heading into what is believed to resemble the ultimate economic nightmare: The Great Depression. Still, there is a joke circulating about George W. Bush's "limited" intelligence in which he was believed to have said, "Well, depression is good, otherwise it would not have been called 'great.'"
Yeah, right, but this does not sound so funny today, especially to one who has invested in U.S. properties and other financial products: a regular hardworking American middle-class suburban resident like me who trusted the U.S. financial regulations and policies.
It might be the macro picture of the current state of the U.S. economy that the whole world is watching anxiously as it has started to cause ripple effects throughout this blue planet, but the lesser-publicized side is the extent of the social casualties that have been occurring ever since the property market started to plummet in 2006.
For instance, families have moved out from decent residential areas due to their subprime-mortgage properties being foreclosed or short sold and children have had to re-enter public schools in not-so-desirable school districts, where many inexpensive apartment buildings are located. Consumer credit scores have been ruined and this has been creating ripple effects, no matter how small, in retail and credit-based purchases, such as automobiles and other expensive items.
Joseph Stiglitz, the Nobel laureate in economics, George Soros, the legendary financier and millions of ordinary Americans might have different perspectives on this issue, but we all have one singular concern: we need to boost confidence back into the marketplace both in Wall Street and Main Street and strive to lobby for financial policies that would bring a better future for all, particularly the common people.
Because, after all, despite all those negative points and not being the unipolar source of power any longer, America still lingers in the minds of most world citizens as the geopolitical center. In short, if good ol' America falls, the whole world might start tumbling down.
Stiglitz warned us early that George W. Bush is likely to beat Herbert Hoover, the president who was believed to have caused The Great Depression, as the "worst president ever" when it comes to the economy. And it is very likely, which has all started to come into the light of day, that Bush's legacy will be more insidious and longer-lasting.
This Nobel laureate pinpointed four facts in the December 2007 issue of Vanity Fair: the vaporizing surplus, the bankruptcy boom, the US$3 trillion war in Iraq, and the contempt of the world in which he has been successful in weakening collaboration among nations by undermining multilateralism and replacing it with an American-dominated system.
Soros in The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means argues that the prevailing paradigm that financial markets tend to find equilibrium is a fallacy, and that this has partly contributed to the current collapse. He proposes a relationship-based paradigm in which thinking and reality go hand-in-hand by critically examining misconceptions and misinterpretations.
Many Americans are feeling the pinch as their taxes have been loaned over to bailout companies whose bad practices have ruined my and many others' future financial well-being.
Yup, those federal loans of $900 billion* to bail out AIG, Freddie Mac, Fannie Mae and others, as of the writing of this article which is Sept. 18, 2008, come from taxpayers who are now in a pretty bad shape themselves. But apparently the world and the world economy, are now closely interdependent. A consumer is also a lender and vice versa. [*The approved figure was $750 billion.]
While my mortgages are not subprime, my property investments have been devalued by 50 percent due to the foreclosed and short sold properties surrounding mine. It means for every property owned, I have been a paying monthly mortgage payment for a mortgage that is now 100 percent over the current value of the property. Capital gains and equity no longer exist. If and when the property market will go up again to offset my losses is a big question mark.
Now it is a matter of being a long-term marathon runner without knowing where I am heading and whether the destination is worth traveling to. But of course there is still a way to maintain my intelligent optimistic composure: be a contrarian and buy those undervalued properties surrounding me in the hope of gaining big later.
Let's see how those presidential candidates come up with workable solutions that would result in prosperity and peace of mind in common people, while maintaining a strong Wall Street. In the meantime, perhaps Sarah Palin can find out from me what constitutes the so-called "Bush Doctrine."
Just make sure "the McCain Economic Doctrine" is something she would be able to recall in a TV interview later. It's time to be cautious but also to learn to become a contrarian in terms of financial prowess. In the end, survival of the fittest matters.
The Jakarta Post, September 23, 2008