A terrifying glimpse into the US mortgage market, via Rafe Coburn, from which it emerges that until about six months ago, you could borrow enough to buy a house valued at a million dollars on a household income of less than a tenth of the sum. What is more, these loans are not on the books of the banks as “sub-prime”. That’s your pension invested in those loans.
I was also led to discover the wonderful world of “Neg-am” mortgages: the deal here is that for the first three or five years, your debt actually increases, because you are not even repaying the full interest, let alone the principal. But that’s all right, because in five years’ time the house will be worth far more than what we paid, right? And we’ll all be millionaires from our stock options, right … right?
The real trouble, it seems to me, is that this housing bubble can’t be collapsed, as housing bubble traditionally are, by a general inflation, because that might lead to a dollar collapse. I suppose that if everybody sees this, some way might be found to manage the mess. But that bungalow in Moskosel looks more fun every minute.