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But why was there bad debt on the market ? Yes the defense mechanisms couldnt work since they were interdependent, but I saw a hairdresser on tv talking of how
by secondaryacct 5y ago
But why was there bad debt on the market ? Yes the defense mechanisms couldnt work since they were interdependent, but I saw a hairdresser on tv talking of how she used to flip 600k houses before the crisis, makes me think she s also part of the problem by failing to obey general accounting principles (dont borrow what you cant repay just because market goes up).
And no, saying natural idiocy in the citizenry is to be embraced, does not simplify the issue: it was caused by natural idiocy which was enabled by lax enforcement. There are countries where your credit score matters not at all and your current ability to actually repay is analyzed.
You can fix the banks all you want but if people take stupid loans you ll never run out of ways to crash.
- mullingitover 5y ago> But why was there bad debt on the market ? This is my point, the focus on bad debt is like obsessing over the last snowflake that fell before the avalanche. The bad debt didn't cause the avalanche, the underlying structure of credit default swap contracts between the banks did. They were all writing each other checks that they couldn't cash. If the underlying problem of unaccounted-for credit default swaps didn't exist, the bad debt would've just been another snowflake falling on the ground, essentially.
- amanaplanacanal 5y agoDoesn't all insurance work like this though? Insurance companies can pay for individual losses, but are bankrupt if everybody loses at once.
- mullingitover 5y agoYes, but these weren't insurance companies, they were retail banks. That was the problem.