I'm sick of hearing everyone scream about the subprime lending problem, and how interest rates should be dropped to bail everyone out, and how all these people stand to lose their homes and yadda yadda yadda. This week's Economist finally nicely mirrors my take on the situation, only in a soberly smarter fashion than I have been able to.
But it is also easy to descend into caricature, portraying borrowers as victims of villainous banks, brokers, rating agencies and hedge funds. By one estimate, half of all subprime borrowers lied about their income. Many chose to ignore the risk that house prices might fall. Heaping all the blame on Wall Street and its clients ignores the role of broader forces. Ultra-low interest rates and Asia's savings glut provided much of the liquidity that inflated the bubble.People took risks in hopes of increasing their savings and maybe making a profit. But a risk is not a savings account. It's a risk because you stand to lose just as much as you stand to gain.
Allow the market to readjust itself, and stop looking for a bogeyman to blame the situation on, and a quick band-aid to fix everything, .
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