History repeats itself. The story of economics is that new generations don't seem to have the capacity to learn from previous generations. Everyone seems to get wrapped up in a frenzy of greed and fear.
Few people around the world will remain unaffected by what is happening in America. It is unfortunate because of the numbers of older vulnerable people on fixed incomes that will be impacted severely. They worked to reap their rewards of retirement only to find the government had not drawn up the rules of play for the banking systems carefully enough and much of their futures were under threat from inaction and complacency.
When I, myself, noticed that much was seriously amiss with the US policies for lending and that it would produce an almighty housing crisis back in 2002, I said to myself, "Here we go again. Its as if the only country that knows how to contain these things is Australia, and that's because it was so very severe there so long ago. Don't people remember the property loan crisis in Texas at the start of the Regan presidency? Look what that did!" It forced me to do things in anticipation of disaster that others thought were pretty crazy. "Well," I said, "If you buy a property in the wrong place right now you will be strangling yourself with a steep mortgage for the rest of your life. I don't intend to do that." Of course, no one listened, not even my own family. "The government would never let such a situation arise," was the reaction I was getting. Yes, faith in a government that had the blinkers on. Just read the reports of the time and judge for yourself.
An explanation of the current sub-prime mortgage crisis can be found on wikipedia. The thing to realize is that the situation is getting worse as the full scale of problems emerges and the global financial system gets to grips with the severity of what has happened to lending in the United States.
Internationally, the crisis was easily evident in the summer of 2007. The full facts of the severity were not visible to policy makers because of the way the loans were packaged and netered banking accounting systems after being bought and sold like commodities. Reporters realized that the crisis was spreading rapidly into much of the economy as Vikas Baja and Louise Story reported in the New York Times in February. Those of us that watched people in Cleveland losing their homes were already very worried.
Fiona Lake reported on the way the crisis was being handled around the world.
SOME INTERESTING LINKS:
- Primary Mortgages
- Tom Bawden on potential home loan defaults TimesOnLine
- Urjit Patel on aspects of international situation arising from the crisis Brookings
Home equity loans
- Robin SidelWall Street Journal
- Ruth Simon Wall Street Journal
- Consumer loans
- Ben Bernanke urged banks to act quickly to avoid recessionary forces getting out of hand.
- Spending and credit cards
- Scott Lanman - Bloomberg
- World Situation - Phil Izzo - Wall Street Journal
- Stock Market
- Peter McKay Wall Street Journal
- Phil Izzo compiles economists reaction Wall Street Journal