America’s New Deal with Capitalism
By
Thomas Schinkel
January 9, 2009
2008 may very well go into history as the year most everybody wants to forget. What started in 2007 as a seemingly obscure set of problems in the arena of sub-prime mortgage lending morphed into a much larger banking crisis, that culminated in the now infamous $800 billion Banking Sector Bailout Request to Congress last September. Along the way, another equally threatening crisis emerged, with the cost of fuel running amok during the summer, but then rapidly fading during the fourth quarter of the year.
But the crisis of the Financial Services Industry ended up inviting a much larger problem, a massive decline in real estate values, combined with a major retreat of stock markets, not just in America but around the world. Through the fog, it is sometimes difficult to separate one crisis from another, let alone trying to get a fix on what caused one crisis and what exactly triggered the next.
Everybody agrees that this crisis is really big, and that it is a real challenge. But how big is the crisis? Is it $800 billion? Will a stimulus package of $700 billion fix the problem? After all, during the summer of 2008, every family in the country got a stimulus check from the Federal Government and whatever it did – it did not stimulate the economy!
So, let’s start at the beginning and try to get a fix on how big the total group of embedded crises really is. We’ll take a five-year look at Real Estate Markets, at the Stock Market and at the Bailout numbers for the Financial Services Industry. We will look at these three interconnected crises through the prism of the American Middle Class, that rapidly shrinking sector of society that seems to be hardest hit by the crises that are all around us right now.
I. Real Estate
