An Experiment in Scotch

K recently asked me about our money sit­u­a­tion is, where things stand and where we are going. I told her that we prob­a­bly wouldn’t buy much stock any time soon because I don’t believe the econ­omy is in good shape at all and that 2007 will be bad news eco­nom­i­cally, specif­i­cally in rela­tion to what I believe is an impend­ing hous­ing collapse.

At the time, I didn’t have any real con­crete proof but when I read arti­cles like this one, I feel pretty secure in my analy­sis. We, as a nation, have become so accus­tomed to car­ry­ing debt, specif­i­cally unse­cured, high-interest debt that it is hardly pos­si­ble to think of what might hap­pen if that debt came due. When you back that debt by draw­ing equity from your house, the risks are unimag­in­ably high should some­thing bad hap­pen either to you per­son­ally or to the econ­omy and hous­ing market.

When peo­ple who make a quar­ter of a mil­lion dol­lars a year carry 33% of their income in credit card debt not to men­tion a sec­ond mort­gage, some­thing is very very wrong. This econ­omy is no dif­fer­ent from past ones and even­tu­ally, that debt will come due. This is not some Brave New World where debt has no con­se­quence. Even­tu­ally, the hous­ing ATM spree we’ve gone through over the past 5 years will come back to kill us.