When big brother sneezes, world falls sick

A few years ago, a friend was shopping for a second residence in Orlando, Florida, the home of Disney World. The cost of a six-bedroom home, with a pool, was $450,000 (Sh42 million).

As few months ago, he went back and saw the same home for sale for $150,000 (Sh 14 million). And last weekend, the price was $130,000 (Sh12 million).

While even the lowest of the home prices might seem outrageous in Kenya, the anecdote illustrates the massive decline in value of real estate, a reflection of the shrinking wealth of the common American. It’s a bottomless chasm.

America’s economy remains weak in many sectors and has not yet begun to recover from the decline that began in late 2007. That is why President Obama began a campaign this week for renewed job stimulus, particularly in the infrastructure of roads, bridges and airports.

If the president can get his plan through a fractured Congress, economists believe there’s a good likelihood that these new jobs will reduce unemployment in time for the national elections in November 2012.

But it’ll be a bandage and not a fix. Here’s one reason why: Under the continuing housing price collapse sit banks and other financial institutions that are on the edge because they loaned out too much in the good years.

Imagine this: There are an estimated 100,000 abandoned homes in Detroit, and a third of the population has disappeared. Many left the city because of the collapse of the auto industry
They could not sell their property. So they simply walked away from their residences.

The boyhood home of Republican presidential contender Mitt Romney is one example of some of the stately and historic mansions that have been abandoned and now destroyed.

The financial industry, which is bailing itself out of problems recognised in 2008, is facing another round because about one-fourth of Americans owe more on their homes than they’re worth. Bank closing are down by roughly half this year, but more is definitely on the way.

Adding to this toxic brew is the government cutbacks being mandated at both the national and local levels. Those hit the hardest are the ones who have the least. For example, unemployment assistance is being cutback drastically in several states.

We’re also facing a new round of unemployment as states lay off workers. The replacement jobs that are being created by industry, often with federal help, are so low-paying that we’re seeing the underemployed become competitors to those who have no jobs. In other words, people must have more than one job to stay afloat.

All of this pales, of course, to the food crisis in Kenya, the unfolding tragedy in Somalia, the recurring power outages in East Africa and the spiraling inflation that makes everything cost more for everyone.

But there’s an old saying in Africa: When big brother sneezes, little brother catches a cold. Big brother is quite sick these days, and that could mean difficult times ahead for the rest of the world.