THE FINANCIAL CRISIS

By Felipe Argote

The neoliberal model was walking smugly around the world, dearly cherished by so-called Washington Consensus, when suddenly crashed face to face with the reality of a recession. The market fundamentalist neo-liberal Economists, who spent a year under the carpet sweeping the housing bubble, justify it saying ... nobody could have predicted this recession. That's true. Nobody can know by magic financial future if the rule is that there is no rule.

The financial crisis started from late 2007 but was hidden Deliberately Because at that time was the U.S. election campaign. The public statementto a recession was not suitable for the Claims of the Republican Party in power at that time. It was not enough that people were sick of the lies of weapons of mass destruction, soldiers and men an women soldier photographed with naked prisoners of war in Iraq, nor by the secret prisons at Guantanamo. A recession would be bad for the political claims of the heirs of George Bush and Dick Cheney so they hide it.

However it was not possible to hide the truth forever. So the bonbas of "toxic assets" in its dynamic carrying exploded the world's largest economy and as a house of cards the rest of the global economy.

But how everything started? Deregulation Let's see it. As the cornerstone of the neoliberal model, the state does not intervene and there is an efficient market, This determine the growth of a financial bubble. This is very simple. Mortgage brokers, are like insurance agents in our country. Having no limits in its handling of the financing mechanisms for achieving their potential customers, they decided to turn the financial reality with expectations of individuals to acquire housing. So, they sold for example to those who had no capacity to pay when purchasing a home of $ 150,000 a system where the buyer paid a fraction of the monthly payment for five years and the next years would have to Substantial increase based on the premise that they would increase its revenues in the coming years. This would pay their mortgage at the time stated in the contract.

Of course this increase in income did not happen in many cases and people began to lose their homes due to nonpayment. This is compounded by the fact that in Establishing these mechanisms fictitious housing prices rise as there is a demand Which does not correspond to the current supply. One can imagine that in our country those who have capacity to pay a mortgage on a house purchase of $ 60,000 bought a $ 150,000 house hopping to raise their incomes after five years. This brings up the price of those same houses as demand rises. The house price rose Because Of course this did not stop to mortgage brokers that they turned back credit opportunities for the plaintiffs to acquire their sales commission. But at the beginning of the loss of homes or to exploit of the bubble, they fell to their real price. A citizen who bought a home at $ 150.0000, and lpaid it for five years, had not paid more than $ 3,000 because we remember that payment was below its monthly average, but the house was auctioned for $ 100,000, Because as we said lowered price on the market. Then the citizen, became homeless and still owes $ 47,000 to the bank.

A clever mind will ask why banks granted loans under these conditions. Very simple. In the absence of regulation, these banks in turn sold the mortgage, or debt of the public, financial market through bonds. When asked what supports the bond, the answer is ... mortgages. And since everyone is Convinced that the mortgage is the safest assets, buys the bonds in the market without any apprehension.

Of course, the bubble exploded the house fall in value, people lose their homes and the holders of the debt, either through bonds, either through mortgage options fall into bankruptcy. This is the genesis of the financial crisis and leading to the global economy into recession now we are suffering.

Currently, the market fundamentalists like Alan Greenspan and all the advisers of the Bush administration are so upset that they failed to explain what is happening themselves, while the new Obama administration seeks to stem the collapse of the economy with Keynesian measures, putting much of Taxpayers 'money to save General Motors from collapse and all those who are tearing their hair out asking the state to be limited to public roads and building schools, those big capitalists in the past lobbies and succeeded by the neoliberal model Privatized profits but now they are asking to socialize the losses.