Thursday, October 02, 2008

HousingPANIC: The Ponzi scheme could have been stopped

HousingPANIC on the housing bubble and resulting credit crisis:
It disheartens me to see this mess today. The ponzi scheme could have been stopped in its tracks in 2003, 2004, 2005, 2006, or 2007. But now, it's just too late. Now, the pain will be greater than even most of you expected. And the damage to the reputation of America will last forever.

It didn't have to be that way. They could have listened.

And they did not.
What about 2001 and 2002?


  1. "What about 2001 and 2002?"

    We didnt have nearly as many junk loans before 2003. Thus, whatever bump up we saw before then was done via people who could largely qualify for loans and were willing to pay those prices. Some times house prices do rise ya know.

    Mind you. 2002 should have been the end of it. In a normal cycle 2002 would be the last real appreciation and then perhaps flat until inflation caught up. However by then it was too late. Some nimrod thought of CDOs and away we went!!!

  2. It strikes me as funny for someone to be talking about Ponzi schemes right now. I am inclined to say that all of modern Economics is just a Ponzi scheme.

    There is this constant need for growth for the economy to be healthy. And for companies to grow you need people to buy the stuff that they are making. Western consumers are pretty much tapped out right now, which led to the need to "develop" consumers in developing nations.

    But what will happen when all of the population of the planet is tapped out and can't consume any more.

    And to put an even finer point on it, how much of the growth of the world economy is simply because of human population growth? Most people say that we are approaching (if we haven't already exceeded) the size of the human population that the planet can sustain. When population stops growing (and perhaps declines), will economic growth even be possible any more?

    Or even more to the point, some have argued that the expansion of humanity in the past hundred years has been facilitated by cheap and abundant petroleum. Both for transportation, but also the Green Revolution made it possible to vastly increase food production using petrochemical inputs. As we come to the end of the era of cheap and abundant petrochemicals, what will happen??

    Provocative questions...

  3. Remember that Greenspan advocated adjustable loans in early 2004. He literally promoted them. That is because he wanted the Iraq War to be funded with liar loans.

    They didn't stop it ON PURPOSE.