Times are tough all over

[Aliantha]

I think you have a very biased view towards ARM's tw. Long term variable rate loans can be a big advantage if you take out your loan while rates are high. Then during the normal course of economic cycles, rates drop, and you find that the loan you could afford before, now becomes a breeze and you pay your loan off quicker.

If however, you take out a high mortgage when rates are low, not leaving yourself room for rate increases, you deserve what you get imo.

The problem is, banks allow people to take out a mortgage they can afford today without thought to what they can afford tomorrow. If people are too stupid to realize what's coming down the road, whose fault is that? The lender that knows? Or the borrower who's ignorant? Some say that ignorance is not excuse. I agree. If you're going to borrow money from anyone, you should know how you're going to pay it back.

[tw]

Originally Posted by Aliantha

I think you have a very biased view towards ARM's tw. Long term variable rate loans can be a big advantage if you take out your loan while rates are high.

Then explain this. The greatest economic problems exist where more ARMs were promoted. If you think ARMs solve problems, then the government printing money also solves problems. ARM is simply a money game to avert what is needed - a house that the homeowner can afford rather than larger and more homes that nobody would otherwise buy.

This is not bias. Where ARMs were mostly used (ie Stockton CA), now $million+ homes sit abandoned - cannot even be sold for $70,000. More trophies to people who think such money games (ARMs) make people wealthier. The only reason a person should even afford that more expensive house - he is more productive in his job. Instead we created ARMs - money games - to get him in that house. No bias. These same lessons are found all through history.

The only innovation that should make a larger house affordable is product innovation - not money games. My only bias is found in facts of fundamental economics. If finance games make someone richer, eventually economics takes revenge years later. No way around that reality.

There is not free money. Even free money – printing more – results is far more severe consequences years later. That reality is again being demonstrated. Why do we need recessions? To even create the threat of bankruptcy so that the money gamers get exposed and severely harmed.

Another example is GM who should have been in bankruptcy in 1991. Instead they played money games (ie short the pension funds) rather than fix GM’s only problem (some of the world’s worst products). Now GM is even worse and taking more of the US economy with it. Back then, we could have solved GM’s problems by replacing grossly overpaid bean counters with car guys. Now the average American must suffer because GM was not fixed by bankruptcy in 1991. Just another example of why money games only makes economic revenge more severe later.

BTW, did anyone notice? Separate from the $700billion bailout was another $25billion to automakers. George Jr also gave the airlines $8billion for free bad in 2002. Notice how that corporate welfare fixed the airlines. So what will $25billiion do for GM, et al? Protect the #1 problem such as Rick Wagoner - GM's president and a lifetime bean counter.

Sidebar. The entire MI delegation voted for $25billion in corporate welfare. But most of that same delegation voted against the $700billion bailout. Throwing money like a grenade at a problem does not fix the problem - whether it is corporate welfare or easy money using ARMs. The only solution to houses that people cannot afford - smaller and less expensive houses. The only solution to GM's problem is elimination of management that routinely stifles innovation. Neither problem is solved by using money games. Not a bias. A reality proven repeatedly in history.