Originally published at Notes from the bunker…. You can comment here or there.

Dammit, I had a post brewing about this and sure enough here comes the news I was wondering when we were going to see:

Unpaid Credit Cards bedevil Americans

An Associated Press analysis of financial data from the country’s largest card issuers also found that the greatest rise was among accounts more than 90 days in arrears.

Experts say these signs of the deterioration of finances of many households are partly a byproduct of the subprime mortgage crisis and could spell more trouble ahead for an already sputtering economy.

“Debt eventually leaks into other areas, whether it starts with the mortgage and goes to the credit card or vice versa,” said Cliff Tan, a visiting scholar at Stanford University and an expert on credit risk. “We’re starting to see leaks now.”

Well who the heck is surprised by this? “Hmmm…pay the VISA bill and lose my house or pay my mortgage and blow off VISA…decisions, decisions.” No brainer…people are going to circle the wagons and pay the mortgage rather than lose their homes. Next up – auto loans. You watch, those are gonna be next. And as the housing industry gets shaken up with construction businesses going under youre going to see that sort of effect carried into other parts of the economy as the ripples from the housing industry spread out.
Credit card debt is, I believe, ‘bought’ like mortgage debt so who ever is holding the note on all that debt may be in for a nasty surprise. I think the only ‘winners’ to come out of all of this are going to be people who kept a calm head, lived within their means and have a few bucks to spend. Who knows, in a few years (or less) you may be able to buy real estate, cars and other big ticket items at some very good prices. What I see in the news says that foreclosure sales are being attended with alot less interest than one would think…meaning that perhaps those people with a yen (so to speak) to invest arent convinced that prices will go down even further.

Theres opportunity in everything and Im sure theres opportunities here for those who are careful and have money. Unfortunately, that aint me.

I’m quite glad Im a pessimist. When I got my mortgage a few years ago the guy said to me “We can give you this rate or we can go with an adjustable rate mortgage.”
“Well, thats definitely a better rate…”
Yup, it’ll save you $[xxx.xx] a month over this other rate.
“But that rate could change, right? My monthly payment could go up?”
Yes, but it could also go down.
“Not a chance. I’ll take the hgher fixed rate.”

I may be economically ignorant but I knew that I could afford $X dollars a month. No more. So I paid a higher rate but assured myself that my monthly payments would pretty much remain the same. Now I pat myself on the back for being paranoid and pessimistic enough to have taken the safe route.

2 thoughts on “Economy

  1. When I bought my first house and was presented with the ARM option, it didn’t take much thought to realize that the term of the mortgage would cover a number of economic cycles and that I wouldn’t have the control over my mortgage costs that I would with a fixed rate. The big thing with your fixed rate these days is to make sure you don’t have a prepayment penalty. Paying off early can save you a bundle.

  2. rates

    I find it amazing that the Fed Gov’s solution to this mess is to GIVE taxpayer dollars to the cheats in the mortgage industry that promoted this scam and the flakes that can’t pay. What about us proactive mortgage payers who didn’t fall for the ARM’s, took the higher fixed rates and pay on time? Nothing for us and now the Gov’t is going to take OUR money by force and give it to the gamblers and the dumb asses. Crikey.

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