Wednesday, August 13, 2008

Sub Prime Mortgages and their devastating effect on the US Economy.

It is no secret that the Sub Prime Mortgage Crisis has caused turmoil amongst the powerful financial institutions and lending houses, but one aspect of the mammoth collapse that has not been talked about a lot is its effect on every day people.

When the Big Lenders get in trouble, obviously it is time for a bail out from the Feds.

But what is there available for the people at the other end of the equation?

The debtors.

And the only bail out that most regular people will be elgible for is to get out of jail.

The real solution of course is to own up to the reality and do the right thing.

Declare Bankruptcy, pay your dues and start over.

And in fact, despite the massive efforts of clever debt-for-profit institutions, people figure this out.

And now we are seeing bankruptcies in record numbers. Over a million anticipated for this year alone, and the real crisis, the one that affects regular people---the ones without jumbo jets, golden parachutes and private equity funds----is hardly underway yet.

This is going to be a roller coaster ride, both for the economy and for the regular folks.

3 comments:

Anonymous said...

We are seeing big reductions in the credit lines given to businesspeople who run small businesses. The net result is that small business USA will not be able to adequately fund expansion - hurting the job sector and overall spending.

This is not yet known by the public at large - but all of us VPs at the banks are watching as we reduce the average line of credit by 75%!

The ripple effect will be a year in the making. Washinton relies on small business expanding and keeping the unemployment numbers low. It will start to spike in 2009 late.

HappyPiranha said...

With respect to anonymous' comment, how can a small business be expected to compete against the big box stores who use bulk purchases and strong-arm tactics to undercut any price a small business could charge and still profit? Also, at what level are small businesses expected to employ people and "keep[] the unemployment numbers low." Sounds like government might be a tad bit unrealistic.

Kim said...

After yesterday's news (rejection of the bailout plan by the House of Representatives), it looks like the roller coaster is starting to move.