The Tipping Point

I'm sure that in retrospect, the actual point at which the credit bubble avalanche began will be some other week, but as far as I'm concerned it started the first week of August, 2007.

Because that was the week that it began hurting my family economically. Not that they don't deserve it; but they're MY FAMILY and I love them. And they are really representative of families in the millions all over this country. People -- regular people, who don't obsess about any kind of "bubble" and who don't even know what "bubbles" are -- are beginning to smell change in the air. They don't know that Bear Stearns is going through a shake-out in management due to the massive failure of three of their hedge funds based on CDOs in the mortgage industry, they don't know that over a hundred mortgage banks have failed, they don't know sub-prime from prime rib.

All they know is that it turns out Real Estate doesn't always go up, that they actually CAN'T refinance into a lower house payment, and that even selling their house isn't an option because no one is left to buy it for what they owe on it. And they don't know what to do.
The cost of food has gone up.
The cost of gas has gone up.
The cost of heating/cooling homes has gone up.

Workers in all sorts of businesses are beginning to feel the effects of the spigot of easy credit suddenly being shut down. Hours are being cut, and paychecks are shrinking even if people keep their jobs. Health care share of costs have been getting larger and larger over the last few years, and that has been a concern all along for most people, but suddenly it is a HUGE concern because they can no longer borrow in order to pay for unexpected doctor visits and they no longer have the extra money for that $70 copay after they buy groceries and pay utility bills.

Wall Street is finally beginning to feel the effects, too, but I don't give a flying flip about Wall Street, ya know?? That great need that market players have to make massive profits fed into this mess. It drove the credit bubble, and that drove the housing bubble. If Wall Street had taken their lumps back when the Dotcom bubble burst, we wouldn't have this ever-so-larger bubble to deal with now. Back then, it really was contained, to bubble investors and to the technology segment. It hurt, then, too. I had a son-in-law, as well as an old friend, who both lost jobs and to this day do not work in their fields of computer engineering and technology, and who are both making much less than they did. But this credit and housing bubble is much more far-reaching. People were feeding our consumer-driven national economy with equity from their homes, not from any increase in their wages. People bought and flipped homes, never intending to live in them. Mortgage brokers and Realtors made two or three times what had been normal yearly compensation, as the "value" of houses skyrocketed and took their commission percentages up with it. OF COURSE these "professionals" are not going to tell the media, or the consumer, that Real Estate under normal circumstances does not continue to appreciate at double digits every year. They may not even want to admit this to themselves.

Cities and towns all over the country believed that they were having massive growth. They built schools and planned on the windfall taxes being permanent. Builders negotiated new subdivisions, and new infrastructure.
And no one seemed to notice that most of those homes never had anyone move in; or that the same person was claiming to be living in multiple homes in the same subdivision. And now, the builders have to finish projects, and have to keep building even though it's evident that no one is buying. And there aren't enough students, so the new schools never open. And tax revenue is going down.

The avalanche is picking up speed. When it's all over, yeah, I will probably be able to afford to buy a house. I wonder if I'll even want to, at that point.