Reap What WE Sow - Part 2

You can read Part 1 here.

So now everything's come down.

Those that had too much greed were placed in positions of too much power.

And just like before, when things became too good to be true, the invisble hand came through and bitch slapped a lot of people.

Unfortunately a lot of us small people (as I like to refer to someone like me) got hurt in the process.

So remember those people that couldn't afford those houses that I mentioned in Part 1?

Well, someone smart had an idea that they could package up those loans and sell them to someone else, who offered them to willing investors who were offered amazing returns with very little risk.

Because Joe Schmoe was surely going to pay for his mortgage when his 5/1 ARM ballooned up from 5% to 18% right? I mean there is no way in hell Sally Schmoe (of no relation to Joe) was going to lose money on her home investment! Look at how much housing prices had risen in the past year! Of course she could be $0 down on a neg am loan. I mean what does "neg am" really mean anyway? That she could get that monthly payment down to a manageable amount and own the house of her dreams. Finally she was living the American dream.

And we all know how that's going to end. Or do we?

So we got caught up in the housing bubble.

And now no one can pay their mortgages.

And they packaged those mortgages in to investments.

Which they then sold on the street.

Which they then used to invest in a market that was also bubbling at 50 to 1 margin. So for every $200K home loan that the Schmoes knew they couldn't afford, John Schmuck was out there trading $10 million dollars in who knows what.

But I'll tell you this much: Not many people make money in a bear market. Even bears tend to get a little bit bullish when the market's fallen that standard 20% to represent a "true" bear market. Sorry if they got in 20% too early...that's going to sting when not only have we lost the Schmoe's original loan amounts but we've lost an extra few million on top of it. Now remind me how much 20% of $10 million dollars is for each loan a bank sold for $200K? So you're telling me you lost how much?

All the while consumers continue to rack up debt...not seeing the horrible multi car pile up that's coming miles down the highway. Now they've lost 40% in their 401Ks. The half a million dollar house they bought 2 years ago is now worth half of a half of a million dollars. They realized all of the 0% interest credit cards were only for a promotional period and forgot to pay them. Joe's company is getting downsized and Sally's been on unemployment for 2 months already. This is definitely not going to be a happy Christmas!

And they're scared. The giant feed back loop that is the media is doing nothing to assuage the fears - rather massage them. Nothing better than ratings right? Telling us about how bad everything is out there.

But it's not that bad. I'm sitting here in my half million dollar house. Which is warm from the heat I can afford to pay for this house. In front of my TV which has been paid off from my 0% promotional credit card. I put on clean, gently used clothing tonight which was my own which was paid full price for. And I ate a hearty meal of chicken tacos and salad and will be having cake shortly.

This is not the great depression. Personally I'd love to see another depression because we needed some sense slapped in us. Admittedly a lot of us would suffer a great deal (definitely including me) if we went through something like that again. 25%+ unemployment rate. Food banks with lines around the block. Nothing but salted, boiled water to eat again for dinner tonight. And probably breakfast. And someone's got to chop down that last evergreen out front to make kindling for the fire tonight. Living through something like that might change American's consumption habit...or at the least overconsumption.

I am interested to see where this does go though. All the bailouts that are occuring could be the start of something good again for this country - or in a few years we may point back to this time and realize what idiots we were. For the sake of the majority, I pray it's the former.

For now though we have to let time work out it's course. In my opinion we all are to blame (admittedly some more than others) so in our own ways we will all suffer.

The recession hasn't been technically decalred yet. And the layoffs are just starting now.

Is it time to move from the "greatest nation on Earth" to one of the "greatest empires to ever exist on Earth?"

Unfortunately I don't think the word hubris was meant to be applicable only to the ancient Greeks.