The Housing 'Time Bomb'

Widespread speculation, 'interest only' mortgages with no down payments, and a 'ridiculously low' prime lending rate -- combined with a huge federal deficit -- all point to 'economic armageddon' for the U.S.

1 minute read

July 29, 2005, 9:00 AM PDT

By Michael Dudley


"The facts are astonishing. The current housing bubble is 'larger than the global stock market bubble in the late 1990s (an increase over five years of 80% of GDP) or America's stock market bubble in the late 1920s (55% of GDP). In other words, it looks like the biggest bubble in history'...The banks have lowered the standards for home loans to such an extent that the traditional loan of 20% down and a fixed interest rate is virtually a thing of the past. Instead, those conservative practices have been replaced with 'creative financing' schemes that put the entire housing market at risk.

"Shaky lending, interest-only loans, no down payments, a US government that is $8 trillion in debt due to Washington’s profligate spending, and a 'ticking-time bomb' of adjustable-rate mortgages that will reset within three years -- the table is set for a disaster of Biblical proportions. If we hit a bump in the economic road ahead (rising gas prices? recession?) the 'Land of the Free' will be knee deep in bankruptcies and foreclosures. We’ll all be fighting for a soft spot under the freeway onramp."

Thanks to Michael Dudley

Wednesday, July 27, 2005 in Dissident Voice

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