Posted on 11/09/2007 6:52:59 AM PST by Hydroshock
The story here is that the buyback agreements were worth the paper they are printed on because the underlying mortgage broker has no holdings to buy the mortgage back.
There is actually cause and effect here. When credit card slips become money, as they did, then the cost of everyting goes up (it's called inflation, which is as much the result of credit expansion as it is the printing of Ben Franklins by the FR). So, the only way to support a family, buy food, gas, etc. is to pay the market price, which is established not by current earnings, but by current earnings PLUS credit.
That is why Greenspan stopped printing M3. It made it too obvious what the FR was doing to keep the whole business aloft.
We realize it, but we also see those tight families with the top cable TV offering and multiple cell phone contracts. Many of them can't separate luxeries from necessities.
In an information age economy I am not sure that cell phones and cable TV are necessarily luxuries, in the same way that a $60M Park Avenue apartment or Chateau Lafite is a luxury.
Second and most importantly, you have missed the entire point. The point is that the fundamental cause of this entire problem is Alan Greenspan creating an economic system that replaced cash money with credit, raising the cost of goods so that you could not acquire them with "cash" only but had to accompany some cash money with a bit extra of a credit transaction. You cannot blame the half of the people who are underwater as a consequence, without blaming those who created and profited enormously from the mess in the first place.
I will let Travis tell you in the immortal words of Thos Jefferson and Ludwig von Mises what happens when you create a credit based monetary system. The short answer is, it creates enormous econimic distortions, disconnects economic power from sound economic transactions, and creates this exponentially growing time bomb that sooner or later blows up in everyone's face. Interest is the eighth wonder of the world in the words of Nathan Rothschild.
Last week we heard Bernanke throw in the towel. He doesn't know what to do to fix it because all he can do is print money and give it to the guys who were in on the cabal with Greenspan from the beginning.
Cable TV is entertainment, not information. Cell phones are gab and gossip, not information. When I experienced a tight budget, I lived without both. There is no hope for the younger generation.
Cell phones are even an essential part of economic life in India, Turkey and Africa.
I presume that you are a boomer trying to lecture the younger generation on their affairs. That is a laugh.
With it as bad as it is, I am so glad that we don’t have any bills right now. That has not always been the case. When we first got married, bills were about all we had. lol.
We not in India or Turkey. But with the new spoiled generations, we may soon resemble Africa.
If someone can't pay twice the minimum payment, then he's got a lot more debt than he can handle. If increasing the payment to a level where he can't afford it forces him to restructure that debt, then in the long run he'll be better off.
Persisting in a situation where you only pay the minimum payment is not in anyone's best interest (except maybe the credit card company's).
If you can't pay cash for something, you shouldn't be financing it with a credit card unless you know you'll be able to pay it off right away.
There are other, much better ways to finance long term purchases that you don't have the cash for up frong. Credit cards should NEVER be used as a source of long-run financing.
I know of no generation more spoiled than us babyboomers.
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