I
thought I should take this opportunity to write out something that has been on
my mind as of late. I truly have no
excuse not to write other than idyllic sloth. Since and even before the North American Mortgage Crisis of 2008(2008NAMC) I had subscribed to a fringe group of
apocalyptic millennials religiously adhering to a belief that a crude oil
shortage and crisis was imminent. I won’t
say that I no longer believe in the doctrine but rather that I - like most ppl
- push it off into the background of my worries.
I
will confess that even after I returned to my academic community in May of 2007
my direct experience with the mortgage industry and thus my insights into the 2008NAMC was the reference point around which my new studies
organized themselves. This remained unchanged for quite some time and in truth
I must think very hard if I am to pinpoint exactly when I broke out of its
grip.
As I
think on this, the breakthrough will have to be attributed to a combination of
two events. The first was my decision to take a sabbatical in Kerala. I had
planned the trip for quite some time but things really got going after I booked
my ticket. I boarded an Emirates Airlines Boeing 777 bound for Kochin via Abu
Dhabi from Pearson on January 27, 2012. I arrived in Kochin and caught a taxi
to my apartment in Ernakulam after a twenty-four hour flight. The second event
is so miniscule that it would certainly be overlooked by anyone trying to
identify the causes of my apparent change of mind.
When
I was packing I was truly disorganized and scatter brained. I wanted to
simultaneously take everything and nothing. The exigencies of the moment,
however, rectified my human failing and crystalized the necessities at the last
minute. At first I had elaborate plans to catch up on my fiction. I had
ambitious vacation plans to hunker down by the beach and at last treat myself
to Hemingway and Rushdie, and even finish Crime and Punishment. Oddly
enough, in the panic of the moment I elected instead to pack John Tomlinson’s Globalization
and Culture, Tarak Barkawi’s Globalization and War and even most
surprisingly Ellen Wood’s Empire of Capital.
There
is a recurring instinct or need for me to make a claim or a prediction with
regard to the 2008 Mortgage Crisis. As I mentioned above the urgency of this
need faded into the background as I focused on my health and experienced
moderate pain relief. I had adopted the default position that my obsessing on:
1. the international price of crude (WCP),
2. the 2003 US Invasion of Iraq (USII), and
3. the 2008 Mortgage Crisis (MC)
was caused by my medical issues and were therefore not
backed up by the facts.
However,
in my fine health and intellectual serenity I have no excuse to utterly neglect
an academic treatment of the phenomena noted above. The question I want to
address intellectually and academically is: were they related and if so what
are the conclusions that would follow as it relates to the future? In other
words: what does the future hold after the 2003 US Invasion of Iraq, the
doubling of world crude oil prices, and the 2008 Mortgage Crisis?
My
intuitive conspiracy theory apparatus does its own thing and has joined these
phenomena into the following conspiracy. It asserts that the 2003 USII was a
pre-emptive move to safeguard the economic interests of the US in its contest
and increasing vulnerability to China. It puts forth that the US conspired to
artificially inflate the WCP to increase the cost of inputs for Chinese
industry. This would therefore be a drain on China’s FX and simultaneously make
its industry less competitive. Broadly speaking, the overall objective of this
conspiracy is to stunt and hobble China’s meteoric economic rise and thus
subject it to US control. Ofcourse, if you are invested in US capital then you
have an interest in the above-noted outcome. The fear if you are one such as
noted above is that the mission will not succeed and doubts as to the security
of one’s investments in the US in the short and long term.
Again
I return to you to address widespread anxieties about the North American and
global economy. There is prevalent dissatisfaction and doubt in the vigor of
the state of the economy despite the Panglossianism of the media. I am seated
here in some discomfort as I could easily divert my interests into more
immediate forms of instant gratification. So you see, I am not here to achieve
some sort of psychological catharsis by way of literary and logical exercise.
The only compulsion driving my current intellectual activity is the
dissatisfaction with the dearth of high calibre scholarship on the phenomena
mentioned above.
The
most widespread anxiety on the minds of North American investors is simply the
question or instinctive panic that the recession will become a permanent
depression. In other words, GDP will no longer grow. The allure of the
historical precedents such as the Stock Market Crash of 1929, the Great
Depression of the 1930s and the rise of Totalitarianism in Europe evokes fear
that the 2008 Mortgage Crisis is the twenty-first century equivalent of Black
Monday. I suppose it is only prudent to speculate that the coming future will
be a repeat of history. So, the unarticulated fear is that, “Yes, this is not a
recession it is only the beginning of the Second Great Depression which will
lead inexorably to a global political and social upheaval, in other words:
World War III – The Nuclear Holocaust.”
In plain investor speak the prevailing common
wisdom is that 2012 is not a good time to buy simply because acquisitions are
likely to depreciate and thus lose us money. This is the fear that is retarding
investment and an economic rebound. The governments of the world are doing what
they can to ‘stimulate’ the economy by printing more money and the fear is that
this will lead to hyperinflation and conclude with the loss of confidence in
currency notes, and state institutions. As I said, this is the unspoken fear.
It is little addressed in the mass media but it is the prevalent fear of the
business and intellectual elite. Despite the spending spree of state treasuries
the only real way that the economy will truly rebound is if these captains of
industry put their fears to rest and retire the intuition that a Second Great
Depression is imminent.
There
are reasons why I refer to the financial crisis of 2008 as the Mortgage Crisis
and not the Housing Crisis or the Sub-prime Crisis in tune with the mass media.
The simple reason is that from my vantage point what went sour were a lot of
mortgage deals. I worked for a firm whose job it was to securitize loan
disbursements by ensuring that in the event of default legal title would pass
to the lender – our clients. Realtors, for similar reasons may refer to the
same crisis as the Housing Crisis and mortgage brokers as the Sub-prime Crisis.
The
summer of 2008 is truly a date that simultaneously intersected both my
routinely commercial office space, the halls of government, and the news
studios. It stands out because the fortunes of my industry and profession rose
and fell in tandem with the fortunes of the business and political worlds. My
firm prospered from 2002 to 2008 as did most North American firms. My firm has
struggled to make ends meets from 2008 to 2012 – the present day. The majority
of firms in North America are in the same boat.
2002
saw an almost compound rate of growth in mortgage lending, refinances, and
second mortgages. The economy saw its financial sector grow year on year.
Mortgage brokers would confess that it was subprime borrowers signing NINJA
loans who kept the growth alive. Realtors would testify that it was the
‘housing boom’ where houses kept selling for higher and higher prices. People
like me who had to securitize all the signing saw the details. This is why I
believe that we saw the Devil.
Prior
to the current work my previous attempt at making sense of these individual
phenomena consisted of religious adherence to the Peak Oil Theory (POT). It
seemed to bring the three individual phenomena together that seemed almost
intuitively certain. POT had an especially privileged place in the conspiracy
theory due to its explanation par excellence of rising crude oil prices.
POT also seemed to be the common sense explanation as to why the US Army would
invade the dustbowl of Iraq, i.e. “It’s the oil. Duh!”
The
conspiracy that the US is actively adopting a policy to sabotage China’s
political position can be broken down and analyzed further. The conspiracy
implies coordination between various arms of the US Government as it draws upon
the economic phenomena of increasing crude oil prices, the political phenomena
of the 2003 USII and the financial phenomena of the 2008 MC. Therefore, one who
subscribes to this theory must be implying that the architects of the
conspiracy include prominent officials in the regulatory and executive branches
of the US Federal Government. Broadly speaking, this refers specifically to the
Federal Reserve, US Treasury Department, and the White House.
Then
came the bombshell 2006 report by the Permanent Subcommittee on Investigations
that found systematic market speculation was artificially inflating the
price of crude oil.
