Out on the street, without a key
By
Lorenzo Gonzalo Read Spanish Version
Stock
exchanges round the world fell last week following news of problems
with debt markets in the United States. The first big drop occurred
on Tuesday, July 24, when Countrywide, one of the largest mortgage
companies, declared that the real estate market would not level off
until 2009.
Real
estate in the U.S., Europe and, to a lesser degree, in the rest of
the capitalist countries is part of the speculative process with
which corporations make their largest capital and accumulate earnings
without producing anything. It is the process by which money loses
its significance and becomes more money.
I am not
going to explain money. It was never part of my specialty as an
economist and I could never understand the importance it was given,
beyond professional labor and production itself. Nevertheless, I must
say that it was a tool of exchange, replacing the consumer goods that
were once used for barter.
Money —
easier to carry and store — encouraged the processes of individual
production and, later, numerically synthesized the big industrial
production, services and trade.
Time
turned it from a nominal value to a value in itself, with the
emergence of finances, the category of "price" as a factor
of measurement, and the gamble of the production process we all know
by now. Finally, money acquired the magical power to grow by itself,
on the margins of what it produced.
Of
course, that illusion involves real adjustments that periodically
must be
made, because the phenomenon of "multiplication" (with the
exception of the Biblical reference to bread and fish) does not exist
in practice.
After
the Sept. 11, 2001, attack, the exchanges panicked, which is one of
the factors that condition this game of chance. Then, the capitals
withdrew and the gambling continued, with investors betting on the
purchase of real estate, principally homes.
As a
result of the contraction in the demand for buildings and new
construction, prices rose, because the Law of Supply and Demand is
not an invention but the result of the manner in which we produce.
The greater the demand and the smaller the offer, the higher the
prices.
Money,
in its dual role as a tool of exchange and gambling chip, raised the
"price" of real estate to levels that did not match the
real process of production. After the Twin Towers panic, the bets
rolled back to the exchange, dragging along the irreality of a sector
of construction that had nothing to do with the need for housing.
This
phenomenon became possible because, to facilitate sales, lending
institutions established payment terms that granted credit without
taking into account the ability of borrowers to pay off their debts.
When
real estate prices declined again and borrowers were unable to meet
their repayment commitments, the whole structure crashed to the
ground. By then, the money bag had been taken away by those people
who engage in the magic of "multiplication." About 40
percent of the new homeowners will probably be left on the street,
without a key, without any chance to buy homes again.
What’s
interesting about this is to see how the problems of the United
States affect — to such an overwhelming degree — the process of
world economy.
