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From the American Dream to the American Nightmare

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From the American Dream to the American Nightmare

How Government policy and public complacency are transforming America from an Owners society into a Renters society

I should write a book about the subject, but I am lazy and busy. So I am going to write a review about the non-existing book “From
the American Dream to the American Nightmare (How Government policy and public complacency are transforming America from an Owners society into a Renters society) instead.The book starts with an analysis of the number of home owners compared with the number of renters in the American society, from the end of the Civil War onwards. It compares voting rights at different historical moments and shows how land ownership or, in a more general sense, any ownership, is intrinsically connected with the right to vote and make political decisions in public life. After reviewing the data, it makes a convincing argument that the advancement of public liberties is in direct correlation with the number of people who own homes or small businesses at any given time. Admittedly, this part of the book relies heavily on A Free Nation Deep in Debt: The Financial Roots of Democracy by James Macdonald.

“From the American Dream to the American Nightmare” continues pointing out how at times of financial crisis there are large transfers of capitals from the working and middle classes to financial institutions and indirectly to the traditional land-owning class. It shows how the motto “The banks want your payments, not your property”, applied to situations in which financial institutions move into the foreclosure of bad loans, is actually a myth.

Through the analysis of the crisis of 1907 and 1929, and the laws enacted to forbid banks to hold too much bad credit or properties, the book shows that historically, the banks do have an interest in having the real estate of borrowers who default on their loans. On the other hand, the book argues, if you think of the land-owning /financial institution community as a union of interests, it is clear how the banks cut the credit to the middle and lower classes, but keep it open for individuals and institutions that can back the credit with other property which it is not the one for which the loan is being originated.

In this manner, the book shows, when the credit spigot closes, it actually produces a great transfer of real estate from single home owners to large owners of real estate. Of course, this economic disparity, the book argues, eventually produces civil unrest, and throughout the history of the United States, public policy moved to control this large accumulation of real estate in the hands of the few by giving access to credit to larger groups of the population. Here the book makes reference to Nationalizing Mortgage Risk: The Growth of Fannie Mae and Freddie Mac (Aei Studies on Financial Market Deregulation) by Peter Wallison and Fannie Mae And Freddie MAC: Scandal in U.S. Housing by James R. Cristie; which explain from different perspectives how the government helped turn the tide of ownership when the popular political movement in the 60s’ started to threaten the stability of the system.

The subtitle of the book makes reference to the attitudes of the American public, which contributed to the current crisis (mismanagement of credit lines, borrowing beyond means, living beyond means, etc.), and to how they are being used by a small fraction of the American population for their own interest.

Although the book refrains from providing any solutions, it is a good synthesis of how the current crunch on the real estate and credit markets will end up transferring a large portion of the available real estate in the United States to a relatively small group of people. And how, since the working class and the middle class will still need to live somewhere, they will end up renting the houses which until recently were theirs.

Franklin @ November 1, 2007

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