Before going off on the Miami Herald, I want to say what a fine editorial it's published on the anniversary of September 11th; in essence, how our democracy has gone off-track in the so-called war against terror.
What is missing is any mea culpa or acknowledgement by the Herald of its own failure in coming so late to its conclusions.
What sticks in my mind, for instance, is the awful, "hands-off" reporting of the 2003 Free Trade Summit of the Americas event in Miami, and the shameful display of police force against citizens.
I went into the youtube video clip archives, for a visual reminder. Here's one:
Sad to say, I knew better than to go downtown during the FTAA protests. Knowing how much Governor Bush wanted the Secretariat in Miami and how how grimly determined he was not to be embarrassed by free trade protesters in his home town, anyone in the mainstream media should have been alerted of the high potential for abuse of authority.
But the wise words the Miami Herald printed today were no where to be found in its pages, during the FTAA debacle in 2003.
Today, the Herald writes: "The threats are real, but the greatest damage comes from our own fears. Six years later, it may be time to recognize that the best way to beat al Qaeda is to reject those fears and stay true to our values, our freedoms and our Constitution." Those wise words might have comforted a city rocked by the abuse of police authority in 2003.
My point is not simply to berate the Herald from being late to the expression of today's point of view, but to alert Herald editors and executives to ways in which the same shortcomings highlight the ways in which the paper is still falling short in its coverage of the what I called earlier this year, the biggest story of 2007: the collapse of the housing bubble.
Back in 2003, the Bush administration spin masters-- both in Washington and Tallahassee-- succeeded in their full-court press on the media and helped to throttle mainstream media criticism of the war against terror.
Today it is the homebuilders and the condo kings and the lobbying class that has pressured the mainstream media, like The Miami Herald, to mute its coverage of the housing crash. They warn, direly, of "self fulfilling prophecies". Bullshit.
Florida, and Miami in particular, is the epicenter of excesses in credit markets and boosterism unchallenged by calmer voices. It needs to be reported!
Isn't it about time that the Miami Herald stepped to the plate and informed its audience on the role of land speculators and political insiders who fomented the massive problems we are facing today?
This is not a conspiracy theory: every single land transaction and zoning change is in the public record. The piling of condos into downtown Miami and billions of dollars of infrastructure deficits on taxpayers did not happen under the cover of darkness, but you might think so if you were reading the Miami Herald.
The public interest in South Florida has been kicked around by developers, lobbyists, and the growth machine for so long, that it is possible the mainstream media can't tell the difference what is right or wrong any more than it could in 2001 or 2003.
Today's Miami Herald editorial is about mis-guaged responses by those purporting to protect our democracy but who, instead, have the opposite effect. The mainstream media was complicit, as it has been in avoiding reporting the hard facts about economic conditions today.
Miami Herald editors and executives need to apply that logic to the Miami origins of an economic recession, that gathered strength in the warm and accomodating climate of this city.
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TOO BIG TO BE BAILED OUT
by Peter Schiff
Euro Pacific Capital
September 7, 2007
Now that home mortgage defaults are spreading like wildfire from coast to coast, there is a growing sense of certainty that the government will attempt to bail out homeowners and lenders. The ideas put forward last week by President Bush may be the camel’s nose pushing under the bottom of the tent. However, just as some things are too big to fail, this problem is far too big to fix.
First of all, one has to consider the moral hazards inherent in any bailout. Immediate relief in the form of debt reductions and more favorable loan terms will create a powerful incentive to default. Why would anyone stretch to make a burdensome mortgage payment while others are being rewarded for failing to make theirs?
Even without the incentives of a government bailout luring more people into default, policy makers simply have no idea as to the scope of the problem. Before this home mortgage correction runs its course, nearly every homeowner in the country who had availed themselves of an adjustable rate mortgage or a home equity loan will be in need of a bailout. Even a sizable percentage of those with traditional fixed rate mortgages will find themselves in danger. With millions, or perhaps tens of millions, of home owners on the rocks, there is simply no way the government can structure a bailout without bankrupting the country or destroying the currency.
Bailout or not, the economy will still be in a prolonged and severe recession. Even if Federal aid prevents millions of foreclosures from happening, all of the home equity accumulated during the bubble years will be gone. Debt reduction and restructuring will not stop home prices from falling, and will not make homes easier to sell. After all, those looking to buy homes will no longer have access to the easy credit that made bubble prices possible in the first place. Home prices are a function of what future buyers can afford - not what past buyers paid. If new buyers are required to make 20% down payments, fully document their income, and fully amortize a fixed rate mortgage, they will not be able to pay nearly as much as what current owners paid during the bubble.
On the lo end, any comprehensive government bailout would easily surpass the $1 trillion mark. Where will the Federal government get the money, particularly during a severe recession? My guess is raising taxes will be out of the question. If people are having trouble making their mortgage payments now, significant tax increases will only make it that much more difficult. Borrowing the money also seems like a difficult task, as our minimal domestic savings means we will have to do so from abroad. Given that the budget deficit will likely be exploding as a result of the recession, foreigners are not likely to foot the bill. If they do, it will require significantly higher interest rates, which will only compound the mortgage rate problems for current and potential homebuyers.
Unfortunately, the only realistic way to “pay” for such a massive bailout would be for the Fed to monetize it. If that were to happen, the value of the dollar would plunge, and consumer prices would go through the roof. Now that the dollar Index has finally broken below the key 80 support level, an event that I have been forecasting would eventually occur for years, a run on the greenback may already be in motion. Ultimately, long-term interest rates will soar as a result, and we will experience unprecedented stagflation and a substantial decline in our collective standard of living. This week’s serge in the price of gold, which traded above $700 per ounce for the first time since May of 2006, reveals that some investors are finally beginning to figure this out.
Ironically, in a recession induced by the burst housing bubble, housing itself will not be among our most pressing problems. One of the few “benefits” of the housing bubble is that we now have a lot of houses, many of them vacant. Therefore, few former American mortgage holders will go homeless. However, the real problems for Americans, whether they own or rent their homes, will be maintenance costs (heating oil, electricity, etc.) and keeping their kitchens stocked with food. One thing is for sure: homeowners will certainly not be buying new furniture for their living rooms, big screen TV’s for their media rooms, granite counter tops for their kitchens, or new cars for their garages.
The costs associated with the housing bubble will be huge. However, the price tag for a government bailout designed to prevent it from deflating will be much higher. Even those who get “bailed out” will ultimately be in worse shape as a result. Let’s hope that cooler heads prevail and that the rest of the camel never makes it into the tent. However, just in case they don’t, make sure to get rid of any remaining dollar denominated assets before it’s too late.
Before you dismiss this as completely impossible keep in
mind hes one of the few- along with jim rogers- who
predicted whats happening right now-
That YOU TUBE clip brought back memories. I am glad I left before the violence. Good find Gimleteye, love that YouTube.
Scary prognostication! I think there are kernels of truth but I don't see an economic meltdown of epic proportions. An American recession will spawn a severe worldwide recession.
Good call on the police and FTAA. Amazing how a City of Miami police chief whose claim to fame was zero tolerance for petty crimes is himself dismissive of his own white coller crimes and ethics violations. Meanwhile, the Herald remains a champion not just a supporter. The problem is that the Herld is just too close to the elite and the police to be a critical voice in the community. Sure it nips at the edges, yet it refuses to tackle the big problems.
How big will the housing bubble be? Who really knows? The the current adminstration will bail out homeowners is very unlikely. All of the current policies proposed only bail out huge financial institutions or speculators. It seems quite certain that the dominate ideology is guided by the same ideology that created the Medicare Drug Policy, that is socialism with financial welfare for the wealthy and capitalism for the rest of us.
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