We're creating an ownership society in this country, where more Americans than ever will be able to open up their door where they live and say, welcome to my house, welcome to my piece of property. - President George W. Bush, October 2004.
When the housing bubble burst back in 2007 and the reality that much of the economy was based on fictional money set in, there was at least a glimmer of hope that something more sustainable would take its place. There was serious talk of financial regulation, returning to safer lending practices, and a banking system restructure so that it couldn't collapse so dramatically. People re-evaluated their obsession with housing and stopped buying homes they couldn't afford.
But 6 years later, risky lending is back, and people are back to purchasing houses and other goods they really have no business buying.
So what the hell is going on? Why are Americans repeating the same behavior that wiped out a third of the nation's wealth in a span of a few months? Here's a theory: It's a huge conspiracy orchestrated by the US government in collaboration with the financial industry. And I'm not kidding.
One of the greatest tricks modern capitalism has played on Americans is the myth that 'anyone can make it' if they work hard enough. That myth has been exposed by the damning statistics on the appalling lack of social mobility in America. But the greatest trick modern capitalism has played is the lifestyle available to those who haven't made it and probably never will. Sadly that myth hasn't been debunked because in America, you really can live like a millionaire without having any money.
Thirty years ago, you could afford the lifestyle associated with earning a six figure salary by actually earning a six figure salary. If you wanted a house, you would put down a large deposit, then spend the next 25-30 years paying it off. If you wanted an expensive television or car, you'd have to have enough to buy it outright.
But now all you need is a credit card and a friendly mortgage broker and you're set to live the life of an international pop star. New Mercedes? Sure thing, just lease it! 3D television for the kids? Just put it on the credit card. Want that mega mansion up in the hills? Just come up with a $10,000 deposit and borrow the other $990,000!
Leading up to the housing crisis in 2007, you could purchase a house with as little as 3% downpayment. As Matt Taibbi wrote:
Almost everyone knows that for decades mortgage dealers insisted that home buyers be able to produce a down payment of 10 percent or more, show a steady income and good credit rating, and possess a real first and last name. Then, at the dawn of the new millennium, they suddenly threw all that shit out the window and started writing mortgages on the backs of napkins to cocktail waitresses and ex-cons carrying five bucks and a Snickers bar.
Giving people with horrific financial histories access to insane amounts of credit and allowing them to defer payment indefinitely meant millions of people living in houses they had no business being in, and buying flatscreen televisions they would never be able to pay off. This was great for Wall St in the short term, but disastrous when it transpired no one could ever pay back the money they borrowed.
So why was this allowed to happen, and why the hell are we doing it again? In short, because it was immensely profitable in an economy where debt can be bought, repackaged and sold to other investors. And sold again, again and again. For example, JP Morgan generates around $3.8 billion from debt trading every quarter, and that makes up almost 16% of the bank’s total earnings.
Not only is debt massively profitable for rich people, the access to cheap credit and cheap mortgages is one of the primary reasons there isn't serious political revolt in America. With superficial wealth, people are kept happy enough to keep the system going, and so fearful of financial ruin that they dare not stop working. The average household credit card debt is $15,607 in America, and many people simply accept that debt as a part of life.
So what would happen if you took away access to cheap credit and ludicrous mortgages? It's not that difficult to picture - there would be outrage from working people, a sharp reduction in house prices, a big slump in economic activity after people stop buying iPhones, followed by the rapid realization that they don't earn nearly enough money.
Historically, times like this lead to political revolt - and it almost did in America with the sudden rise of the Occupy movement. Inevitably, politicians are desperate to avoid situations like this at all costs, and move quickly to avert catastrophe. In America, political change works about as fast as its rail road system, so rather than address structurial problems with the economy, the government and Congress moved to reinstate the banking system by using tax payers money to erase all their astonishing fuck ups. Luckily for the powers that be, no one really understood what was happening, so using taxpayers money and lending it back to them at interest barely raised an eyebrow. We were told it was 'necessary' to stop the system collapsing. It certainly did that, but we should have been asking whether that system was worth saving in the first place.
What can be done about this vicious cycle of debt that ultimately leads to economic collapse? As is always the case with complex problems, we need to go to the root of the cause. And in this case, it has to do with the ideology underpinning our current obsession with owning things. Whether this has been sold to us as an idea, or is intrinsic to human nature is really neither here nor there - it is unsustainable and will inevitably lead to more misery and destruction, so it must be countered.
One simple way to illustrate the illusion of 'home ownership' is to get Americans to stop paying their mortgages, then ask them who really owns their homes.
Here's a clue: it isn't them.