How US mortgage debt could cause a global financial crisis

Moneyweek.com ^ | 7-5-06 | Dan Denning

[freedumb2003]

he only reason we're in good shape is that we don't throw money away on fluff.

I pay cash for everything except my mortgage, which I am paying down 2x and will be done in 5 years.

We keep a small account that we put $$ into so when we want to buy something or go somewhere we have it already accumulated. But we don't use it much -- we are OK with a 5-yo TV and a 8-yo DVD player/sound system.

We keep our cars in excellent shape -- at the current rate they will last about 20 years.

I don't how debt-ridden people sleep.

[RobRoy]

heh, heh. I drive a 2001 LeBaron convertible. I'm doing the same.

[RobRoy]

OOPS. 2001=1991

[linda_22003]

I was going to say, my car is a 2000, so what's the big deal? :)

[petercooper]

http://www.foreclosure.com/

[RobRoy]

yeah, been there. There is also foreclosurS.com.

[petercooper]

did you try the free trial? is it legit?

[RobRoy]

Naw. I just want news stories. The only money I have ever spent on the internet is guitars from Rondomusic and a garage door opener remote from Ebay.

I don't even do free trials.

[Hydroshock]

It is getting scary.

[steve-b]

I hate, HATE these "mortgage vultures", that prey on the undisciplined.

Yeah, I keep getting their junk mailings.

Amazing how much weight you can get into a standard postage-paid envelope when you put your mind to it.

[RobRoy]

People in this country have become so pacified by the relative piece and calm of the last 60 years. Sometimes people need to look at films of the depression and even people escaping the Blitz in Poland and realize that those things ARE possible.

Every generation must be diligent on many fronts. We have not been. We have been fortunate and are an accident just waiting to happen. A quite bad one, I fear - and to say we are "soft" would be a severe understatement.

[dakine]

"We are cutting spending, increasing savings, and paying down debts."

Good Idea, the FedGov needs to get the extra cash from somewhere, glad it will be YOU...

[Eagles Talon IV]

While I can no more see into the future then anyone else, I can state the following feeling quite sure I am correct.

1. Interest rates are still low. I bought my first home in 1968 and even working IN a bank and getting a .25% discount, I paid 6%. Now, almost 40 years later the rate is not quite .5% higher.

2. We are closer to the end of the interest rate raises then the beginning. My guess is a raise in August is about a 55-60% possibility and one in October is about a 30% probability.

3. There may have been some speculation in homes by "flippers" but I don't see that as being anything much. Most people bought their homes to live in them and the RE market hasn't come close to crashing. The slow down is in certain markets that were on fire to begin with.Real estate prices go up and down but on average they have risen about 6-8% annually. I see nothing that will stop this. I know it's been said before but it is true that the reason RE is a good investment is they aren't making any more of it.

[L98Fiero]

First, he didn't ask me for any facts. Second, every article he posts here is doom and gloom. I do tease him about it. Third, here is the end of our conversation:

Hydroshock: "I hope it won't but fear it will. That is why I am perparing my families finances. We are cutting spending, increasing savings, and paying down debts."

L98Fiero: I would say that is good policy. We are doing the same.

Now, mind your own business.

[Hydroshock]

Lead.

[Petronski]

They are considered the equivalent of AAA-rated Treasury instruments. So this article is bit of a red herring - if the government ever refused to shore up the MBS market in a crisis, it would be equivalent to touching off another Great Depression. They wouldn't dare not to do it.

You're right, of course, but I would put it more strongly.

They are considered the equivalent of AAA-rated Treasury instruments. So this article is a gigantic red herring - if the government ever refused to shore up the MBS market in a crisis, it would be equivalent to touching off another Great Depression. They wouldn't dare not to do it.

[N3WBI3]

Oh I'm sorry I must have missed the disclaimer that a public bulletin board is the place for private conversations...

and you must have missed the part where he said dispute facts and you said he wanted our economy to collapse..

[Petronski]

Your post just goes to show, pimpdaddies never change!

[steve-b]

Various snippings from the garage help. Really, if they're going to insult my intelligence with the suggestion that I'd seriously consider exchanging my 5.75% fixed mortgage for one of their dubious offerings, what other response should they expect?

[gogeo]

He and his wife cashed out all the available equity in their house last winter and along with new furniture and a trip, she got a breast enlargement...

At least some of it was put to good use.