Reply #10: I knew the bubble would burst three years ago... [View All]

[CoffeeCat]

...when we went looking for a house. The mortgage broker tried to steamroll us into an interest-only ARM, and she
wouldn't let up. Our realtor encouraged us to "Buy more house!" because the "today's financing allows you to
pay so little for so much!" These jackals came at us from all angles.

The signs on the lawns of the houses we would look at--were now signs of future doom, "Get in this house for only $800
a month!"

We knew plenty of others had been bamboozled into 'creative financing' and adjustable mortgages that would reset at
higher interest rates that would make payments nearly impossible. We saw it coming three years ago.

(We signed up for a fixed-rate, conventional mortgage--much to the chagrin of that mortgage broker.)

I'm concerned, because I see the credit-card bubble being the next explosive mess on the windshield of America.

I see the credit-card bubble as much worse than the housing bubble. Just like the housing situation--people
were preyed upon. The credit card companies gave a line of credit to people who weren't qualified--just
as those mortgage brokers gave loans to people who wouldn't be able to pay in the future. Credit cards
have become a way of life--for people making 300k and people barely getting by. So many people are in
up to their necks.

The problems is--people can't pay now--just like they couldn't afford those mortgages. The economy is
bad, and people are saving and paying off those cards. Furthermore, credit card companies are cutting off
lines of credit.

The crisis comes because our economy has been propped up on credit card spending for so long. Seventy
percent of the US economy is consumer spending. I would guess that at least 35 percent of that 70 percent
is credit card spending or some kind of financing. What happens when that dries up?

I fail to see how we avoid a major economic disaster. I fail to see how we avoid massive business failures
and unemployment at 20 percent. We've propped up so many businesses on credit card spending, and when
that goes, I say 10 percent of DOW and Nasdaq companies fail and are never seen again.

I just don't see how this is unavoidable.