How did people get into the subprime crisis? There seem to be many scenarios, and plenty of ratbags willing to blame stupidity, GREED and ill-educated consumers. It may be that owners of multiple houses were part of the problem – if you don’t put down much of a deposit, and no-one cares about your income, and the honeymoon interest is lower than rent, I guess you can spread out like some capitalistic slime mould, expecting to make a capital gain before the full mortgage bill arrives.

For some people, I guess taking out a loan which is cheaper than your current rent would be attractive too. Again, there is the temptation of capital gains.. It is very easy to make the obvious point that the whole system only works if the market is rising, or at least stable. But we don’t think like that when we sign on the dotted line; like everyone else I just crossed my fingers and toes and hoped the market would not collapse when I took out my mortgage. Now, faced with the prospect of selling the thing since I don’t need it and I don’t live in it and it’s stuck in a truckstop country town I don’t want to live in, I am uneasily aware that the bit which goes if the price falls is my equity.

This is all by way of introduction to an account from the London Times of the destruction of Cleveland by a descent into subprime hell.

‘Slavic Village has street after empty street of boarded-up houses, their roofs caving in, collapsed balconies hanging from the fronts of buildings. Some people seem to have just upped and left, leaving their belongings behind for the rats and vandals. Owners have put up signs offering their burnt-out homes for a $500 (£250) downpayment.

Bins and rubbish litter the street. Signs warn trespassers the structures are unsafe. People have spray-painted “No copper” or “No metal” on their doors to deter crooks who have stripped anything of value from these decaying shells. Even brick steps have been ripped off, leaving houses that look as if they are floating on a dark sea of garbage.

Slavic Village is Ground Zero for a tragedy being repeated across America. …”

Meanwhile, in suburban Melbourne, the rents are climbing relentlessly. And this is one of those societies where people don’t have mortgages because we can’t afford them. As the squeeze increases, we don’t get the frightening photos of ruined buildings; the papers weep for the landlord and not the tenant.

A renting crisis is very undramatic. People live with friends and relatives, shift into granny flats, move to some dump on the edge of town far from government services, eat beans and let their teeth go. We have to go a long, long way before this kind of situation is inescapable:

“NEXT WEEK Ohio gets its chance to vote for the Republican and Democrat candidates who will fight it out to be the next president. Anderson set out her views to the Democrat front-runner Barack Obama during a recent visit: “Families that used to sit in their homes around the kitchen table are now sitting around a steering wheel. Some children who should be in their beds at night are laying in the backseats of cars. Their closets are the trunks of those cars and what should be a personal bathroom is now a bathroom in any public area. It ain’t right,” she told the senator.

“It ain’t right,” repeated the senator. He didn’t offer much else by way of solution.”

The whole ghastly story of Cleveland, and the Mayor’s attempt to counterattack by sueing the banks, is detailed here.

Found first by Danny Yee.

This entry was posted on Tuesday, March 4th, 2008 at 11:09 pm and is filed under world politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.