- Dec 22, 2008
The term "I told you so" comes to mindI would like to point out that in January of this year, I wrote about houses not being a sound financial investment.
Popularly "sub-prime" is thought of as referring to lending to people with poor credit history. In fact, 61% of sub-prime borrowers had a credit rating high enough for a traditional loan. The middle class tend to be at least as guilty of living beyond their means as the working class. 21% of those making over 100k a year say they live paycheck to paycheck.
At the time I wrote the blog an unprecedented number of people were deliberately buying houses grossly out of their means using interest only loans (which would never be paid off, by design) on the assumption (by both the consumer and the bank) that the housing market would continue to climb at the rate it was forever.
That climb, however, was driven mainly by that very speculation, valuable only due to popularity.
This summer, 6 months later, so many people were defaulting on their loans that it affected the entire credit industry, and by extension, the entire economy.
I have an associates degree in economics. How is it that I was able to see this, yet no one in the dozens of banks and credit institutions, nor the rest of the financial sector was? Or perhaps were they just confident that friends in the white house would help out with tax payer money?
Stay tuned for the coming of my more direct predictions.