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Re: Jubilee
Quote:
Originally Posted by sebastian_dangerfield
Today’s 800 is tomorrow’s 600.
They said the same thing you’re saying now in 2008.
You’re wildly underestimating the the numbers of weak risks out there. After 2008, ratings were relaxed to improve borrowers’ ability to acquire credit and because banks want to show regulators stronger portfolios. Banks also increased credit card lines for good and decent risks to show a bigger delta between available credit and credit used. This made the borrowers and banks look stronger. Ratings agencies just started making the standards less forgiving last year.
But that’s just credit cards. Look at auto loans. They have 7 year loans now. Is that an indicator of a strong consumer? That’s a product for a strapped person (or a moron buying what he can’t afford).
And what’s been keeping young buyers out of the housing market? They can’t earn enough to put down a down payment. But that’s just a traditional loan. Why don’t they put down 3% on an FHA? Because they still can’t qualify.
Look, the reality is banks loan to most of the public. They have to do so to survive. But only about 25% of the country is strong enough to survive through a four month shutdown. That means a whole lot of loans are going to go into the non performing bucket real quick. The daisy chain of defaults you’ll likely see will be a cycle that will grow in momentum and as it does, default will be normalized.
What’s normalized jumps to ubiquitous in short order.
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I guess we're going to see how it pans out. So far, not too bad. Finger crossed.
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“It was fortunate that so few men acted according to moral principle, because it was so easy to get principles wrong, and a determined person acting on mistaken principles could really do some damage." - Larissa MacFarquhar
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