Real Estate and the Anticipated End of the American Colossus …

[unhappycamper]

Real Estate and the Anticipated End of the American Colossus …
O Globo, Brazil
By William Waack
Translated By Brandi Miller
July 26, 2007


Combining all that "The Economist" and other analysts of great reputation have written about the American economy, it's extraordinary that the predicted catastrophe has yet to occur. In the last three years, this most respected magazine has three times foreseen the bursting of America's real estate bubble.

Or take for example, the equally respected British historian Niall Ferguson. In 2004 he published "Colossus - the Rise and Fall of the American Empire ," a book of pleasant reading that examined how the world's greatest power is supported by feet of clay - its economy; and how the bursting of that real estate bubble would mean much more than just losses for investors: it would mean the irrefutable end to America's position as the ONLY megapower.

For the second time this year, markets around the world have suffered severe losses due to fears regarding the American economy. The market declines this week, especially those on Thursday (July 26), had a sharply focused cause: they reflected the fact that market operators don't trust financial instruments based on credit granted to American debtors, who are evidently in no condition to make good on them.

And who are these "debtors?" They are average consumers who are used to being in debt more than prudent arithmetic would permit, encouraged by the credit-worthiness of goods (their own homes) that now, contrary to what occurred in previous years, are dropping in value every day; and those who were encouraged by offers of easy credit that have now begun to be taken away.

These are the men and women who reelected Bush in 2004. Obviously I'm not saying that Bush's voters are all people in default - I'm merely recalling that the election of 2004 was determined by the expectation that good times for consumers, cheap credit and low taxes would continue under Bush.

It seems reasonable enough to say, at this "height of decline" in the U.S. real estate market, that this is a bill that millions of Americans never believed would come due. Or, recalling the phrase recently uttered by mega-investor (or mega speculator) George Soros in an interview with Jornal da Globo: "the people want to be deceived."


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