A Uniquely 21st Century Problem

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.