As a matter of fact we ought to support free trade. That’s what made America great after all. But when economies can only prosper with a debt boom, what are the chances to have efficient international and national trade policies do you think?

Debtism has not only taken hold in the US but everywhere around the world. In an article dedicated to the French housing bubble ready to burst (since homes are 25% overvalued) it was useful to notice that the ratio of household debt to disposable income in France is a mere 65%, compared with 115% in Spain, 146% in Britain, 171% in Holland, and 190% in Ireland.

In Asia too. The Chinese and India economies who have adjusted their own credit booms to ours and are therefore no longer sustainable either. Same pattern in South Korea which is too on the brink of a housing meltdown:

South Korea had two crises in the last decade: the currency crisis and the burst of a credit card bubble. The trigger of the crises was easy money… But another alarm bell is ringing, this time, for the housing market. From bubble to bubble, its repetitive character is striking _ a similar storyline with different actors…The Korean housing market remains liquid and calm at least for now. But it’s vulnerable to outside shocks that it cannot control. Even without external shocks, we cannot rule out the possibility of implosion… Korea Times - 3/30/07

Where is the point here?

We’ve to come to the conclusion that credit welfare and capitalism are two antagonists. And this is a good thing. Unbridled credit shows the boundaries of capitalism. Capitalism has never meant “the best ownership money can buy”… and never will. Capitalism is not to blame but (our) irrationality. It is not without a reason that Greenspan made a famous speech on “irrational exuberance” infecting the markets during the dotcom era. Unfortunately, it looks as if it is all over again.

American dream ends in property market crash, an headline in the independent.uk reads…

In the most sweeping call yet, a coalition of civil rights organisations have demanded a six-month moratorium on foreclosures. They want lenders - whose reckless and sometimes predatory policies are largely blamed for the crisis - to help victims refinance their mortgages, or face law suits… Barack Obama has called for a “homeownership preservation summit” between lending groups, regulators and borrowers. “We cannot sit on the sidelines while increasing numbers of families face the risk of losing their homes,” he said…. Hillary Clinton: “This market is clearly broken and if we don’t fix it it could threaten our entire housing market,” she said last week… But the industry is resisting the moratorium, calling it an “over-reaction” to the difficulties of the market. Although more than 1 per cent of all US mortgages will end in default, the reason was as likely to be unexpected medical bills or a lost job as abusive lending by a mortgage company, a Bankers Association spokesman said….

Yes, you read well: the industry calls it an “over-reaction” to the difficulties of the market.

Meanwhile two others went belly up bloomberg.com revealed: NovaStar Financial Inc., the subprime home lender whose stock has plunged 80 percent this year, will stop financing independent mortgage bankers. In Atlanta the mortgage lender SouthStar Funding (which employed more or less 600 people) has shut down, citing the industry’s subprime lending woes, Atlanta Journal-Constitution mentioned as of 04/02/07.

Price deflation is here to stay. The giant Fannie Mae is now siding with the pessimists:

District-based mortgage funding company, plans to reduce its workforce by several hundred full-time employees by the end of this year, a company spokesman said.The cuts are part of “an effort to streamline and improve productivity… The layoffs are another in a series of upheavals since regulators accused the company of accounting transgressions in 2004. The company admitted overstating past earnings by $6.3 billion. Accused of fraud by the Securities and Exchange Commission, Fannie Mae neither admitted nor denied wrongdoing but paid a penalty of $400 million last year. The scandal has taken a toll on the company’s stock price, finances and earnings power. Correcting the flawed accounting took an army of accountants two years and more than $1.4 billion… Since then, Fannie has announced that it was shutting the Fannie Mae Foundation.

The Real Estate Journal wrote the following this week:

… By extending generous credit to subprime lenders, Wall Street firms financed the borrowing binge that helped fuel the housing boom. Those firms now are turning off the money spigot. They see more borrowers having trouble paying off those mortgages in a slowing economy, which has made investors less willing to pour money into the sector. More than two dozen subprime mortgage lenders have closed shop, and there is concern that the defaults could spread to other types of risky loans and to less-risky mortgages, exacerbating the housing market’s slowdown and possibly weighing on the economy. Accredited Home Lenders Holding Co., a subprime lender, recently was forced to sell $2.7 billion of loans at a big discount to meet lenders’ demands for more collateral…

Those mortage vultures will affect us all. There is no sign of a recovery. ‘The Grip of Death‘ is a literal translation of ‘mortgage’, when the owner of a house pledges his or her house to another with a handshake…unto death.”

Just like Danny Schechter explains in his movie, the era of a financial serfdom has now started.