Anyone else's office freaking out?

[Myka]

I can just imagine what might happen if interest rates go up like they did in the 80s!!

[Murminator]

Originally Posted by mseepman

In the end Myka, it just means that we've all got too comfortable with debt being a big part of our lives...in the end, cash is king and a lot of people who borrowed to get their lifestyle are paying the price right now in the US. Canada will follow...when big brother sneezes...we all know who catches the cold.

That sums it all up right there

[mark]

and no matter what happens the rich get richer and the poor poorer

[EmilyB]

My best friend from school was of a well to do family. The father always did the guaranteed investments, never the market. She passed this info down to me.

Unfortunately, you have to have some money to invest either way....

[Doug]

Originally Posted by Myka

I can just imagine what might happen if interest rates go up like they did in the 80s!!

Believe me, you dont wish to see that again. I remember when a freind locked in for 18.75% for 5 yrs. as it was a bargin. Tunred out not to be but thats what we all thought at the time.

Imagine that now, with the price houses are worth and the large mortgage people now have. The housing crisis in the states would be nothing compared with that senario.

FWIW, I dont see it ever going there again though.

[Whatigot]

Originally Posted by Myka

So...uh, what's this all mean anyway? I don't get it.

I don't watch tv, read news, or anything like that. I'm pretty out of the loop. In fact this is the first I've heard about this attempted bailout!

Myka, the very short and simplified version is that us banks got extremely greedy in the housing market run up that the us had over the last 20 years and in order to maximize the good times, they started to give out mortgages like I give reefing advice; freely and with few references so that what the banks wound up with was hundreds of thousands of mortgages (read BILLIONS of dollars) given out to people who didn't even have a job or at least any job that could sustain the mortgage, especially in the event of lending rate hikes.

so these banks, seeing that these mortgages were going to be worth less than the paper they were printed on joined in one of the greatest games of pass the buck ever seen, they took this bad paper, packaged it up and sold it as AAA grade investment (as in the safest, least volatile possible investment) and sold it to the funds, institutions and other banks who normally buy the AAA stuff all the while knowing it was anything but.

now since people are defaulting on these mortgages left, right and center it's those who bought the AAA stuff thinking it was low risk holding the bag and wondering what happened to their savings or pensions that were supposed to be "safe" while the banks themselves are being handed their money back by this government bailout...


that's the super simple and somewhat incomplete explanation....

more to come if desired.

[Myka]

Thanks for that ^ explanation!! That's the best one I've read so far.