My journey to the real estate bubble was a little different. It started with a historical fantasy novel that described the London goldsmith’s crisis of the 1690s. That taught me to be deeply suspicious of anything that looked like an endless fount of easy wealth. It would probably be achieving its effect by fatally corrupting something else in the system. The book also suggested that such monsters usually happened in the context of a great nation overextending itself in the course of a war or imperial overextension.
Like most of my extended family (outside of a smattering of artistic types), I worked the majority of my career in the Military Industrial Complex, in my case as a fairly low level information technology worker. Therefore, I care about defense. I had been aware (it was the early post-9/11 era) that the pace of operations for the Western nations, especially the US, was rapidly becoming unaffordable. Inspired by a book I’d just read, I looked around for that telltale fount of wealth.
It took a few months to find it, but eventually the era’s just accelerating housing refinance (re-fi) bubble presented itself as a candidate. Some time later I stumbled across Fannie Mae. This was an obscure amorphous company that didn’t seem to be doing much of anything useful, but was evidently spewing legendary amounts of money to shareholders, managers, brokers, advertisers, politicians, charitable recipients, etc. The complexities of the system it was embedded in were formidable, but I soon persuaded myself there had to be something very wrong going on. You just can’t get that much something for nothing.
It was the six month run-up to the start of the March 2003 war, and I started warning about its unaffordability, and the problems I “knew” lurked in the re-fi bubble and Fannie. My anti-war concerns were somewhat buried in the mass of bleeding-heart objections, so no luck there. I began plastering with messages any analyst with an e-mail address who seemed to be knowledgeable about mortgage finance and was of a critical turn of mind. A surprising number were polite in responding to the embarrassingly crackpot suggestions I was making then.
Today I am hardly any further along the path of macro-economic enlightenment, but the mortgage finance system could well be about to reveal some of its secrets as the housing boom tops. I did learn some things from my wise and patient correspondents, and one of these was the importance of the rather ambiguous “implicit guarantee” on agency debt. Besides that, it may be that I can sometimes pick out a news story or resource that might throw a little light on the issues (or perhaps just delight us with some little absurdity that crops up in the process).
Debi has graciously invited me to try contributing stories about “the guarantee that never was”. As well, she lets me share on the Doom sidebar some of the compelling, informative, or just plain silly articles that I come across. My one real “competitive advantage” is that I live an hour ahead of Eastern time (and four ahead of Pacific), so can sometimes throw a few things up for your amusement at a time that looks earlier than it actually is.
I’m really a visitor to Doom, just like you are. I’ve just gotten into the habit of hanging around the place more than some. Feel free to drop me a line.
John (at) HousingDoom (period) Com