Sunday, August 28, 2005

Debt Warnings

News sites are covering a story warning of American's crushing debt burdens, especially here in California. It's a nice review. However, it's nothing new to us "bubbleheads". I appreciated the retrospective at the end; people never learn; maybe more of us should have stayed awake during history class:
"Many Americans are too young to remember that the Great Depression was the result of a bubble bursting when a panic in the market caused the crash of stocks, real estate and commodities that had been bought by speculators with borrowed money."

"More recently, in the late 1990s, investors bid the stocks of technology companies so high - even those without any profits - that prices couldn't be sustained and the market crashed in 2000, triggering a national recession. The stock market still hasn't fully recovered."

"A recent study by analysts at the Bear Stearns & Co. Inc. investment bank in New York says most bubbles share the same characteristics: A strong economy and a sense of prosperity leads to speculation which leads to price pressures and a rise in interest rates which can lead to the bubble bursting."

"The analysts - Francois Trahan, Kurt D. Walters and Caroline S. Portny - believe that at least eight of the 10 characteristics of a bubble environment currently exist in America. But they are not surprised that few see it: "The idea that a financial disaster could occur at any moment is too far-fetched for individuals to imagine during times of such heightened exuberance."" [emphasis mine]

1 Comments:

Blogger marin_explorer said...

Despite the "wealth" of Marin, do you think many residents here are overleveraged on RE? Stats would certainly be interesting. I'm guessing some people overextend credit to just live here.

As a possible indicator, I've noticed that some towns have a rather high incidence of foreclosure/bankruptcy, such as Sausalito and Mill Valley (source foreclosure.com). This is a relative comparison to other Bay Area suburban towns.

Aug 31, 2005, 11:41:00 AM  

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