I think there are things like that regarding credit card type debt.
I am sure that circa 2008 some people, (for mostly political reasons,) tried to portray mortgage debt that way but that was rhetoric.
There is a pair of (Kenynesian) economists, Aker;of and Stiglitz, who won a Nobel Prize for a body of work described as “the market for lemons.” They showed:
Imagine there are two types of cars
1,) Is a lemon, it’s broken, but even lemons are worth $1,000. You can buy it an pay another man $19,000 to repair it.
2.) You have no idea if it is good or bad but the salesman says it is good. He says it needs no repairs and the price tag is $20,000.
Akerlof and Stiglitz “proved” that under such conditions “no one” would pay for the expensive car., they might lose money. In 2008 that happened in the housing market. Any other investment (stocks, bonds, gold, paintings, superman comic books) was better than buying supposedly-good mortgages.
Except the rating agencies were telling the buyers “we are an independent voice of reason, unassociated with the deal, and we are giving you our unbiased opinions that the car you are buying will need no repair.”
but that was a lie. They were rating the bonds per the instruction of the packager.
Here is a helpful article which explains many derivatives were not collateralized by mortgages.
The value and payment stream of a synthetic CDO is derived not from cash assets, like mortgages or credit card payments – as in the case of a regular or “cash” CDO—but from premiums paying for credit default swap “insurance” on the possibility of default of some defined set of “reference” securities—based on cash assets.
This news just released a few minutes ago "Builder sentiment in the market for single-family homes fell sharply in May, as mortgage rates shot higher and building material costs showed no relief. Homebuilder sentiment falls to 2-year low on declining demand and rising costs . . . "
Some of you never learned how to produce your own food, or make your own medicine, or purify your own water, or create your own clothes, or build your own house, and it really shows - pathetically.
The big financial houses got in trouble selling what amounted to naked call options (credit default swaps) on MBS. The largest sellers of these call options were leveraged (had sold) at 25-30:1. Meaning they had in effect sold insurance policies against default, with potential claims of 25-30 times the value of their actual ability to pay if they sold everything.
Purchases of real estate are almost always contingent on the ability of the buyer to qualify for credit to cover the purchase. Interest rates and duration, based on the financial fitness factors of the potential buyer drive that train. Equity in an asset is an unrealized gain or loss.
Only about 20% of my IRA and other investments are in the market. It is considered to be a fairly conservative portfolio. Aggressive investors are in much worse shape than I am. In fact, I’m not really concerned … I am confident that the economy will turn back around once Biden and the Democrats get the message that the election was not about things like abortion. In fact, if I were young, I would be buying into the market.
Probably why I am were I am now. I grew up at the very bottom end of the middle class and my family would likely have been considered in the lower class at points. To me, new clothes were a luxury, I got many of my brother’s hand me downs. I didn’t get coddled, if I injured myself, I got a band-aid and sent on my way.
I got ZERO sense of entitlement and from the earliest I realize if I wanted anything, I had to get it myself.
It is always why I have absolutely ZERO tolerance for whining and entitlement. Solve your own ■■■■■■■ lives.
