Blame the Little Guy

September 25, 2008

I've heard so many people from commentators to the President himself explain how the current ongoing financial implosion happened. Without fail, they always mention how home buyers took out loans for bigger amounts than they would be able to repay, and really shouldn't have even qualified for in the first place.

Let's remember back what was going on. House prices started climbing rapidly in 2001, despite the fact that the economy had major problems. The budget surpluses turned into deficits, the country plunged into a war that was supposed to pay for itself with liberated oil - but didn't, the dollar started sinking. Gas, food, and housing costs started climbing, but no one seemed to care. Some how there was always money flowing in from somewhere. Guess where - low interest rates. Despite the fact that houses doubled and tripled in price, people could still buy them with new types of creative loans. The little guy average citizen who would have normally been priced out of the housing market with the sky high prices, could still get in with about the same overall payment as before with these new creative loans.

Despite the fact that the economy was headed in the wrong direction, for the most part people didn't feel it because they could somehow still access housing, cars, and other living expenses. Government leaders even touted how more people than ever were achieving the American dream of owning a house.

Was this situation the little guy's fault? Did the little guy create this system where house prices tripled, and interest rates were cut by a factor of 3 ?? No. The little guy was able to move into a house for what seemed like the same price (at least monthly payment) as in the past, but it was a house of cards simply masking the underlying problems in the economy.

-- Greg