Tuesday, November 01, 2011

Origin of the Housing Bubble

A question that friends of mine could not answer regarding the housing bubble was why weren't the banks in question so avariciously predatory before 2000? The typical answer was that a new generation of bankers had spontaneously decided to throw out decades of best practices in favor of taking short term profits and leaving the mess to be cleaned up after they took their severance packages.

Those fiends definitely existed (looking at you Countrywide). What most people forget, however, is that there was a push on the lending industry by the government to overthrow the decades of lending practices in favor of achieving social justice. An interagency government task force was established in 1994 to address the perceived racism in lending practices that resulted in greater rates of African and Hispanic Americans being turned down for mortgages. Check it out for yourself.

Saturday, August 06, 2011

Is the Cyberpunk World Coming?

I have been a fan of Cyberpunk sci-fi since I first read William Gibson's Neuromancer on the advice of a friend back in 1990. Back then all I was into was the cool attitude, lively characters and good suspense. Since then I have come to see more of the philosophy behind the punk with the works of Bruce Sterling and Neal Stephenson.

All of the stories involved dystopian futures where the mass of humanity is subsisting off the admittedly nifty technological dregs while all of the real wealth was held locked away by the corporate elite. Government was scarcely to be seen, and without that there was nothing to slow the ever increasing divide between rich and poor.

Most of the stories never stopped down to explain the absence of government. Most of the time the implication was that it was essentially bought out by the corporations to look away and keep up only a pretense of regulation. The one work that comes to mind that does address the absence is Neal Stephenson's Snow Crash. He comes right out and lays his world where
the Invisible Hand has taken away all those historical inequities and smeared them out into a broad global layer of what a Pakistani brickmaker would consider to be prosperity
and hyperinflation that has people wielding wheelbarrows full of $50,000 and $100,000 bills with the portraits of Edwin Meese and Ronald Reagan. The fault is laid at the feet of laissez faire economic policies for not restraining the corporate interests, and the result is corporate interests trumping all else.

Being of a libertarian bent, this type of reasoning struck me as sensible as voodoo. Lately however, I find myself thinking that we may actually come to see this dystopia come to pass. Unlike Cyberpunk it will not happen because governments are subverted but rather they have over reached. Given the sovereign debt issues springing up in the developed economies of the world, I see a time where they will lack the revenue to do anything more than pay the bills accrued by previous generations. Japan has been there for the last twenty years. The EU, I don't think, is long for the world. China will not be able to maintain its pretense of prosperity for long. And I shudder to think how the credit downgrade is going to hurt the US.

If that happens, what is going to fill the vacuum? A UN meta-government is a non-starter, who is going to pay their bills when the US can't pay its own?

I don't know if the second part of the Cyberpunk equation, domination by world spanning corporations, will come to pass. I personally doubt that. Large corporations can not adapt fast enough to avoid obsolescence at the hands of smaller enterprises without the government enforcing crippling start-up regulations and ever shifting personnel obligations.

All that I do see is that we are in for some massive changes within the next decade.