Crisis continues, capital revalues itself
The global financial crisis has been hitting hard for months now.
There is fear, serious fear that it is the end of capitalism as we know it.
Well it may not be such a bad idea to constrain the worst excesses of capital.
The South African National Credit Act was a big help in allowing us here in SA to so far weather the crisis much easier that many other, and more developed, countries.
Who would want to live in Iceland? As a fellow from there put it, we had a great country and they ruined it.
The nature of capitalism is that it decouples the nominal worth of stuff from the actual worth of stuff.
As value gets more abstracted from its actual physical value it becomes easier to manipulate and all sorts of dodgy schemes get hatched. While this surplus value creation is in full swing, the old fear and greed factors that run the markets kick in, and kick in heavily.
Folks get greedy and believe that the endless Bull Run is for real, or they get scared that they are missing out and that a zero sum game is forcing them to get the other guy before they get got themselves.
The reality is that the zero sum game does not really exist. There is never a perfect interchange that will lead to a zero sum outcome. It suits the suits to talk the talk using these loaded terms, it helps to vest interest.
The difficulty is that many people who believed that the housing market would go up forever, who believed the 'you just have to get on the property ladder, dahling' shpiel, who feared that if they did not buy this house right here right now, some one else would take it and turn them into a loser.
This kinda zero sum thinking helps the market to inflate itself way out of what its real value is. It sets up a kill or be killed kinda of thinking.
This out of kilter valuation must at some point correct itself.
That correction is now.
The South African housing market has been over-heating for years. Now its time to come back down to real values.
It could be worse.
In the US thousands have been made homeless by the packaging of mortgages together in order to spread risk, but too much notional value was created, and that value was dependent on the market rising and continuing to do so.
The NCA helped to cool down some of the reckless lending that was taking place here previous to its promulgation.
Not nearly as many people will be affected here as there. Our interest rates are turning and the housing market is cooling considerably. It is easy to see this as a bad thing, but the reality is that these corrections need to be enacted to stave off a worse crash further into the future.
As our housing market softens it will turn into a buyers market and there will be some great homeloan deals to be had. You may also be able to save money every month by renegotiating your mortgage and by consolidating your debt. If you are feeling the pinch, get yourself some debt counselling in order to protect your assets until the circle turns.