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Shahla
Money Managing Guru
Joined: 13 Nov 2004
Posts: 3324
Cash Points ££ 126163.28
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 Posted: Sat Apr 21, 2007 5:42 am Post subject: Consequences of Housing Bubble Crash Ignored by the Media fo |
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Consequences of Housing Bubble Crash Ignored by the Media for 2 Years
Trouble in Squanderville - Two years ago, anyone who wrote about the housing bubble was dismissed as a conspiracy nut. Now hardly a day goes by that the headlines aren't splattered with the details of the massive meltdown in the real estate market.
What changed? The facts are essentially the same today as they were back then. In fact, the “Economist” — as well as many independent journalists — had already shown that the Fed's low interest rates had inflated the biggest equity bubble in history which could potentially bring down the entire economy.
Now, all of a sudden, the media is acting as if the problem sprouted up overnight?
Why?
The notion that the media was unaware of what was going on is ridiculous. The business pages in America's newspapers are written by some of the country's “best and brightest”... most of them have MBAs which they earned at our finest universities.
Is it possible that they were oblivious to the trillions of dollars that were funneled into the real estate market to unqualified loan applicants? Or that they didn't know that the rising prices had no relation GDP, increases in wages or productivity.
Is it possible that some of our best educated business prognosticators don't understand the effects of low interest rates or the speculative bubbles they naturally create?
It's simply not possible — the effects of interest rates are the first thing that one learns in Econ 101.
The real problem is that the media obfuscates information that conflicts with the interests of management or their constituents. Their main goal is to promote consumer spending regardless of its effects on the nation's economy. In this case, they managed to hide an $11 trillion economy-busting bubble and nudge us ever-closer towards catastrophe. That takes a pretty talented public relations team. In fact, we've probably underestimated how powerful and persuasive the corporate propaganda-system really is.
While housing prices rose at 10% to 20% per year, the American people were duped into believing that such huge leaps were just part of the normal business cycle — just supply and demand. They never dreamed that the surge in prices was engineered at the Federal Reserve through artificially low interest rates. Everyone believed that things were just hunky-dory — that it was springtime in “the land of the free and the home of the chronically indebted”. Those who disagreed were derided as doomsayers or lunatics.
http://www.marketoracle.co.uk/Article795.html |
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