The theory was that if banks and other lenders made "subprime" loans, that is, loans that had a good chance of not being paid back, that "consumers" without sufficient income would buy the houses, and the housing market would thrive.
On top of that, financial institutions could treat these "subprime" loans exactly as if they were real loans, with real future income backing them, and sell them as if they had real value instead of an artificially-imposed value.
Rinse and repeat for years. Housing prices went through the roof, and people borrowed more money on their tulip bulbs. Some of us were more careful, and ended up still above water.
This is what you get when you pretend the laws of economics don't exist. There's plenty of blame to go around, both parties.
Flame » in reply to No, you've drifted off into the ditch.
And let me expand a bit on the housing example.
The whole thread (32 posts)
- The economy is not consumer driven?
- Property is merely a euphemism used to justify violence. Ask the Indians.
- I see what you mean
- No, you just didn't get it. Or didn't want to.
- Barking mad
- In other words...
- No, you just didn't get it. Or didn't want to.
- "Consumers" don't buy housing.