Housing As a Store of Wealth: Real Estate Is Too Risky!
Adjustable mortgages are marketed to the masses as a benefit to them. Alan Greenspan said you could get a "better deal" with an adjustable, in February of 2004.
That was just at the start of the housing bubble. Not only was he in on the housing bubble, but he was advocating that the borrower like and prosper from the adjustable.
But who really profits from adjustables? On Business Insider at this article by Rob Wile I shared a message and an unknown fellow named Brian M responded. This exchange tells us a lot about adjustable mortgages.
"When you have fiat money you can still stop speculation and easy money lending. You can ban it like in Germany. But the bankers say they can't price a mortgage and need adjustable mortgages or they may lose their shirts. Well, that places the risk directly upon the buyer.
Who needs that?? Rob, who needs it?"
Perviously, I had written this at Henry's interview with Robert Shiller:
"Henry, nice post. Ignorance of probabilities. What a phrase. Probabilities don't capture reality, so when they assumed all mortgages would not fail at once that was one ignorant probability! On purpose too.
Thanks for interviewing him. He neglected to mention that the housing market is forever ruined by the demise of the 20 percent down fixed mortgage. IMO, cash from Wall Street plus easy money loans could prove that you are just throwing your money down a rat hole.
And the question, are we Japan or not means massive risk for a 30 year mortgage at any time. Rent and save the rest. Boycott mortgages.
And it is not just fiat money. You can stop speculation with fiat money. You can ban easy money loans with fiat money. Bankers say they cannot price a loan under these circumstances but if that is true why would you want one???"
In the Shiller article and my response, the concept of probabilities being ignorant of real world risk is a whole other subject. But the point of the above comment is that the housing market is forever destabilized by toxic loans.