The housing sector in the United States of America is undergoing one of the most difficult times in the American history. The situation has become a real problem to the nation, to an extent that it has been classified as a major economic bubble1. The real cause and the direction of the situation is one of the major economic hurdles facing the United States of American today. It has affected many parts of the United States since it started occurring in 2007, while other parts are feeling the effects2. The situation has led to a decline in the number of potential buyers in the housing sector, causing the companies that have invested in the sector to suffer heavily from lack of prospective customers3. The situation has been described as one of the major economic problems that the American economy has had since 2000. There are certainly multiple causes of the problem, ranging from the economic regression to political and social economic issues4. While the American people tend to wonder what the actual causes and the adversity of the problem are, there are certainly long standing as well as short term causes of the problem. It is therefore arguable that the current situation in the American housing market is due to political and socioeconomic problems, both in long term and in short term basis5.
The socioeconomic situation in the United States of America is affected by the leadership and the political will that the leaders as well as other agents of the government have towards the well being of the economy. In particular, the economy of a nation like the United States, which is highly capitalistic, is influenced by the people with political and financial powers. This may not be apparent as one would expect of a nation like America, where the rule of law and democracy seem to control the leadership6. However, looking from America’s current and past situations, there are certain things that emerge and which elaborate the influence of politics on the American economy, and the effects it has on the crisis such as the housing market7.
It is important to understand the economic causes of the problem in order to focus on reviewing the political and leadership influences behind the scenes. First, the American economy performed extremely well in the 1990s, especially the Bill Clinton period between 1995 and 1999, before meeting more hurdles towards the end of year 20008. The period 1995 to 1999 saw the American economy perform at its best in centuries, and the housing sector grew quickly as the prices remained at their best throughout the period9. In addition, buyers were willing to invest in the housing sector, giving the sector a boost. Moreover, the economy favored the stock market, which grew rapidly and performed quite well for any investor willing to invest in stocks. However, on the 2000 crash of the stock market, the housing sector was not affected. So the focus now changed trend, where the investors, including banks and other institutions, shifted from the stock market to the housing sector10. There was very little warning provided by the government agents on ht possible risks involved in massive roll out of large investments on the housing sector. This prompted the American banks to invest heavily on the mortgages throughout the period between 2000 and 2006.
The housing bubble has come just as the American economy is on its recovery bend from the recent economic recession. In fact, the first sign that the American economy, and in fact the world economy was about to face a recession was observed within the American stock and mortgage sector in late 2007. At this time, it was observed that the banks were running short of cash flow as they had invested heavily in the housing sector rather than on the stock market due to fear of a possible crash11. They had failed to realize that there would be housing bubble just as an economic bubble would occur in case they invested in the stock. A number of institutions had also gone rogue and heavily borrowed from foreign and domestic markets, forcing the world market to face the same problems that America would face. So when the housing market started facing serious problems, the entire American economy was affected12.
The contending socioeconomic and political views of the situation
So when one reviews the economy c history of American since 1995, there are certain social and political issues that emerge, and which possibly led to the current situation in America, considering that he economy was performing very well in the mid and late 1990s, it is evidence that there are certain things that were happening and certainly changed after the 2000 elections. First, some scholars argue that the period 1995 and 2000 was the time that the democrats were in the seat of American power, and it is possible that their political and economic policies were certainly tailored towards the betterment of the economy in general. After the 2000 elections, the Bush and his republican party took power at the white house, and applied their economic and foreign policies in the American economic sector. It is evidence that the bush administration was more focused on foreign policies, particularly after 2001 terrorist attacks on the country13. The 2000-2001 stock market crash was a great bubble that came just after the bush administration came to being. It was also the time that the housing sector increased in profitability, making the banks and other institutions invest more in the sector and somewhat abandoning the stock market. It is possible, from the point of view of this context, that there were certain individuals in the regime who had special interest in driving the economy, making the housing sector more profitable than ever.
This further shows that the federal reserve bank of the united states of American is one of the most ineffective agents in the nation. This is another perspective which this paper seeks to bring into limelight. For instance, the Federal Reserve Bank allowed American banks to invest heavily in the housing sector, making the house price rose by more than 22 per cent within a period of just four years14. The bank further allowed the banks to heavily borrow from the foreign markets, especially from the east and Middle East banks. In addition, this further shows that the international monetary regulation is heavily dependent on the American dollar, which allows the American, banks to run rogue on the issues of borrowing15. These are international politics that circle around the fact or rather notion that the American economy is the most advanced and most stable in the world, thus giving the nation a chance to control the flow of money in the world market16. This has caused harm to the American market, and the housing market is not an exception. The republican may celebrate the fact that the housing bubble have occurred during the democratic administration, but the fact is that they have had the biggest role in the problem.
On comparing these arguments with the reality and fairness of the situation in America, one is at a position to realize that there are certain contending issues that arise. For instance, the fact that the housing crash was caused by the redirection of the banks from investing in the stock market due to stock market bubble of 2000-200117. To the economists, this is an economic situation caused by laxity of the Federal Reserve Bank and its failure to control rogue banks. To the political enthusiasts, the regime must have had an important effect, and possibly interest. In addition the influence of the American capitalistic form of the economy is highly valuable if one is to consider the sociopolitical situation.
The position that these claims take may not necessarily mean that they may be wrong or absolutely right in the context, but rather some truth is that the American economy has a number of loopholes that allows for extreme capitalism and extreme political influence, as well as difficulty in controlling rogue banks18. The fact that global monetary control system is quite dependent on the American economy is another loophole that allows the American banks to run rogue, borrowing excessively from the foreign banks and pressing the American markets. It is important, therefore to conclude that the American housing bubble is a product of multiple causes, some of which are just recent, while other are long rooted in the political and economic systems.
Works Cited
DeGrace, Tom. 2008 Housing Market Crash. 2011. Web. 1 Jun. 2011.
Wolf, Richard. After the crash: the pauperization of middle-class America. 2011. Web. June 1, 2011.
R.A. Let the market crash? 2011. Web. 1 Jun. 2011.
WTF Finance. Why did the housing market crash? 2011. Web. 1 Jun. 2011.
