Moody’s chief economist said if there are more hedge fund blowups like at Bear Stearns, the effects on global financial markets will be severe.
He said economic modelling showed that sub-prime mortgage delinquencies would peak in mid-2008 and remain close to the peak well in to 2009.
The reason I keep banging on this theme is because it affects us all. Credit is already getting harder to obtain. Interest rates will continue rising. One of the driving forces in the US economy has been consumer money coming from home equity lines of credit, a source that has now dried up. That means stores will have declines in sales which in turn means job reductions. Fred at Home Depot gets laid off even though he might not even know what subprime mortgages are, making him an innocent victim of a seemingly arcane financial implosion.
Bizarrely, some leftists get almost happy about this kind of thing. Such a crisis of capitalism will surely signal the collapse of the system, they hope. Maybe. But while the current system seems based on greed and fueled by fraud, and certainly needs reform or replacement, we are talking about real people here. Homes lost. Companies shutting down. Bankruptcies. Scarcely a cause for celebration. And it’s hardly a given that a pissed-off working class struggling with debt will break towards the left, they could just as easily go to the right.
Let’s say Monica just got laid off as a waitress at a restaurant catering to a business crowd who are no longer coming because of economic slowdown, and that she and her husband are now in danger of losing their house. The Left needs to be there with an understandable explanation of how our rapacious economic system created such a catastrophe for her.
PS And as DJ comments, find ways to help her!