"The Final Meltdown"?
Naturally there is a lot of chatter on the blogs about the $700 Billion bailout. Let’s face it: if you have a blog, you have an opinion. And there are a great many people expressing their opinions about the unprecedented bailout.
I am no different, except I maybe have more questions than opinions because, quite frankly I’m not entirely sure I understand the problem. I mean, I get the bad loans. I understand why loaning money to people who can’t pay you back is bad for business, but once you start talking derivatives, credit swaps and the like I get a bit befuddled.
Some questions I’ve been dealing with of late are:
- How did we get into this mess?
- What does it mean to the man on the street?
- What can we do about it?
So, here are some items I’ve found in my quest for the answers. Perhaps they will help you too, or perhaps you have some of your own links you’d like to share?
How did we get into this mess?
Ron, over at The Wisdom Journal, has an excellent post detailing the road to ruin titled The Mortgage Meltdown Signs Were There All Along.
For a description of why the problem has become bigger than simply bad mortgage loans, check out Another devil in the financial crisis.
What does it mean to the man on the street?
I mean Main street here, not Wall street . It’s obviously bad news for Wall street, but they had a hand in creating the mess so I’m not too concerned about them. But I happen to live on main street, in a place called reality I want to know how will this affect me?
Well, in short, think recession. Bad recession. High unemployment, high interest rates (especially for those with poor credit ratings). You can read What’s at stake for the economy for greater detail.
What can we do about it?
Ron at The Wisdom Journal said it best in Where Do We Go From Here? How About Back To The Basics. Essentially, live within your means, fund your emergency savings, and jettison the debt. Oh, and while we’re at it – how about changing our life style so we don’t rely so heavily on credit and buy things today with tomorrow’s money:
“He who spends more than he earns is sowing the winds of needless self-indulgence from which he is sure to reap the whirlwinds of trouble and humiliation.”
-Arkad, the Richest Man in Babylon.
Photo, “The Final Meltdown”, by Jill Greenseth
As far as the home foreclosures, it’s impacted friends as they over extended themselves and bought homes with teaser rates. Also, HELOC were a big temptation for many people as they used it almost like free money. Well, we all know what happened. This is really all mind numbing and feels like a bad dream. Hard to see so many good people being impacted by the housing mess.
Yeah, HELOCs were WAY over used. They allowed far too many people to tap their equity far too easily in my opinion, it fostered the behavior of people treating their homes as ATMs. And now many of those people are under water on their loans.
Thanks for stopping by, Scott.