The purpose of the housing bubble was to allow George W. Bush to fight his wars of conquest in the Middle East. According to mortgage industry insiders I have interviewed, soon after Bush became president the word went out to begin the wholesale falsification of mortgage applications so people could buy houses who had no business doing so. A push by state attorneys-general to investigate the mortgage fraud was blocked by Bush's Treasury Department.
The bubble resulted in the tremendous inflation of housing and real estate prices that today is unraveling. Housing is still so overpriced, however, that many people can no longer afford to buy a home or can no longer get credit because financial institutions have become so reluctant to lend.
Housing inflation is what has powered the U.S. economy for the last decade. In its heyday it accounted for fifty percent of all economic growth. Take away the housing bubble, and the U.S. economy is dead in the water. That is why the government has taken over Fannie Mae and Freddie Mac. Unfortunately, there are no further bubbles waiting in the wings. When they gave up their homes to debt, the American people gave up the last thing they owned of value.
Obviously the takeover of Fannie and Freddie is a stopgap, probably to keep the economy afloat until after the November presidential election.
What comes next? I cover these and other issues in greater detail in a Special Report entitled, "Election 08: Crime Family Food Fight or Threat to Mankind?" which is available by subscription.
Copyright © 2008 by Richard C. Cook
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