The Blog @ Spolitics

Bill Clinton: The Problem Was Real Estate Was the Only Game in Town

Maria Bartiromo interviewed President Clinton about his thoughts on the current financial turmoil. Clinton made what at first glance was an interesting point. He argued that part of the reason we’re in the current financial mess isn’t just because there was so much cheap money available, but because there was only one place for it to be profitably invested: real estate. Without any other options, he argues, investors had to get more creative about how to make a buck on the housing market.

Of course, if you think twice about this, you realize it’s the chicken and the egg scenario. Did the money fuel demand, or did the demand suck up all the money? Clinton argues that if the U.S. had a “serious energy policy” it would have created another opportunity for investment and less incentive to push the envelope in the real estate market.

Of course, this is the statement of a man who believes the government drives the economy. But investors were not going to sink money into energy if they could have made a greater profit in real estate. In other words, it’s not that investors didn’t have other choices. They just viewed real estate as their best choice and they chose to invest in it instead of energy. The real estate boom starved other sectors of capital.

Now that the boom is over, money will soon be looking for another home. Usher in the next boom-bust cycle and based on the current political environment, my money’s on it coming in the energy sector.