Now one would think that with all the hubbub and hoola going on about the housing market and prices actually decreasing, we Americans would get it through our skulls that you just can't live off of perpetually increasing property prices and that inevitably we'd have to do what our forefathers did and that was work hard, thus driving this ratio down.
You would think.
And we wonder why the dollar is tanking.
4 comments:
"Captain," you seem to underestimate the ability of Americans to handle their finances. For all your quips about the fact that we're lazy and don't get that we have to work like our forefathers, the American economy is the world's largest, most productive, and most efficient.
Still historically low interest rates worldwide have allowed excess savings from other parts of the world be utilized in our economy. Most Americans do not default on their loans, and the majority of subprime loans' approvals are poor banking (as you state), not Americans. That's capitalism. You let people make choices. Some people may lose their shirts from bad financial decisions. The economy as a whole is not tanking because of it. It's just the market correcting itself.
You are starting to forget that individuals making their own decisions can come together for the better good. That's the invisible hand at work. Stop worrying.
Give it time.
Capitalism doesn't mean that nobody's an idiot. Just remember the Great Depression and how politicians and bankers all failed and didn't react to it. Fortunately, today we know much more about economics, so this shouldn't happen again... but then it's still not guaranteed that anyone will listen to us economists!
When people take cash out of their mortgage, we have more money chasing the same amount of goods. Anybody remember MV=PQ?
If we were on the gold standard banks would raise their interest rates in response to the increased demand for funds and diminished savings, but since they practically just make money from nothing, the banks can act with almost total disregard for market forces while the Fed keeps the whole retard rodeo going with ridiculously low interest rates.
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