I think you make a good point with the illusion of wealth. Debt is an excellent provider of this illusion. It creates the mirage that everything you own today is really yours; well stop making one payment and find out how much you really own.

If anything, the upcoming credit crunch will force many in the public to realign their balance sheets with reality. Living in perpetual wealth may seem fun when times are good but when things start unraveling that is when we see who really had a house built on a facade.

And you, my friend, are what the credit card companies refer to as a “deadbeat”. Ironic, but true, as you’re NOT paying them profitable finance charges and late fees, etc. They earn almost nothing from responsible borrowers like you, and want to seek out the irresponsible borrowers.

Here’s a good article explaining how the subprime debacle isn’t confined to mortgages, but is rampant and widespread. The underlying problem will take it’s toll on many other industries (in this case, Harley Davidson Financing).

http://tinyurl.com/3aj3lc

The collapsing mortgage companies are just the early salvo in the problem of a massive credit bubble: we’re living in a “subprime economy”, with consumers leveraged to their teeth (remember that commercial with the guy living in a nice house riding his lawn mower, smiling while saying, “I’m in debt up to my eyeballs”?).

With the deregulation of predatory loan practices in the 1990’s, the 800 lb gorilla is coming home to roost. You ain’t seen nuttin’ yet, as the ARM loans are coming due for resetting, and dwindling equity was the illusion of wealth that led lemmings over the cliff.

Great question. Unfortunately many people will not be able to make the higher payment. So it isn’t a direct transfer to the entity holding the CDO. They may be able to make a few payments and push off default for a few months but then, as many studies are showing, most folks will simply stop paying.

Now, you have a cash strapped consumer who has ruined credit thus stunting further spending and an investor who is now holding the note to a $500,000 property that is worth $450,000. That is an overall net loss for both parties.

Really great comparison between losing your home and wishing cancer in my family. I’ve had family members pass away from cancer and a cousin who lost his home through foreclosure so I’m familiar with both sides of the story. And trust me, both are not remotely close.

And being under 40 is true, no denial there. Never have I wished someone losing their home and not once have I wished a terminal illness on anyone. You need to look at yourself in the mirror and reconcile the two; even though I’m under 40 I’m old enough to realize that there is something different between being over leveraged and losing your home and losing a family member to a devastating cancer. In one you have control about being financially imprudent and that is a choice you consciously make. On the other hand folks who I’ve known to have cancer have never chosen that path. I find it interesting how you reconcile the two but wish you the best.