One year on from the start of America’s sub-prime mortgage crisis, US house prices continue to fall, and the fallout could claim an unlikely victim: John MCain. The Republican presidential candidate’s economic credentials have come under fire from his rival Barack Obama, because McCain couldn’t remember how many homes he owns.
“If you do not know how many houses you have, then it is not surprising you might think the economy is fundamentally strong,” said the Democratic candidate.
The Democrats seized on McCain’s gaffe to portray him as a man out of step with economic problems and the worries facing ordinary Americans. They re-inforced their message by revealing the size of the McCain property portfolio – seven homes, worth the equivalent of ten million euros.
The two men are now fully on the attack, with the US economy the chosen battleground. As Bill Clinton put it, when it comes to a US election, “It’s the economy, stupid” – no matter what is happening elsewhere in the world, the dollar in your pocket is what matters.
Especially now, when the markets are jittery following the surge in oil prices and continuing fears for the financial health of banks and mortgage lenders. The gravity of the situation is shown by the creaking finances of America’s two mortgage giants, Fannie Mae and Freddie Mac. The downward spiral means they may have to be bailed out by the government. Nationalisation by any other name, something barely-believable in the home of capitalism.
No-one is mentioning the R-word, but record prices, collapsing house-values and rising unemployment leave many fearing full-blown recession. For the moment, neither Obama nor McCain has come up with the answer. But it is here the election will be won and lost.