2008-01-21

HELOC on Wheels

Here, in the heart of New Money and High Tech, I've often gotten the feeling that people around me wonder -- very politely, of course -- why a man in my position has not surrounded himself with more of the trappings of modern affluence.

I don't own a house.

I own -- or rather, will own -- only one vehicle, and it's not an SUV.

The yard isn't meticulously landscaped.

I don't own an HDTV.

I do own a ridiculous number of computers, several gaming consoles, and we have high-speed asymmetric (a/k/a "fake") Internet, but still...

My approach has been a simplistic one -- look at money in and money out, and try to never let money out exceed money in. I mean, that's how it works, isn't it?

But even so, this sense of economic inadequacy is so subtly pervasive, I've often wondered what's wrong with me that everyone around me seems to have more disposable income than I do. How is it that seemingly half the people around me have new cars and electronic gadgetry, and I have trouble keeping the credit card flat? Did I not start saving early enough? Is there some trick I'm missing, I wondered, to getting the neat toys and still keeping your head above water?

Today, Atrios called attention to this article explaining that all the affluence around me may, in fact, have been entirely fake.

In fact, one set of economists opined that the housing market in the US was already overvalued by as much as $6.5 trillion. In 2005.

That's 6.5 × 1012. $6,500,000,000,000. Two years ago.

People apparently have been taking out loans on this $6.5 trillion in the form of Home Equity Lines of Credit (HELOC). It's not yet known how much of this imaginary money has been pulled out and spent. In other words, we don't know how much of the last eight years of America's economy ran on tick.

How many SUVs were bought with this fake money? How many trips to Europe? How many computers? How many cell phones (and cell phone plans)? How many steak dinners out?

Those of you who lived in the San Francisco Bay Area during the dot-com crunch know all too well just how much damage a small number of spendthrift dimwits can do to the economy. Freshly-hired comp-sci grads leveraged their stock options into the housing market, paying any price, no matter how ridiculous (see the San Francisco Chronicle's excellent series Surreal Estate by Carol Lloyd). That made affordable housing disappear. Once the fake money ran out, the jobs disappeared, too. There was no work, and no place to live. I lost an uncomfortable amount of savings, and went into some rather nasty debt before I found a job again.

It's beginning to look like this same damn fool mistake will be played out again on a national -- possibly international -- level.

And even in the light of this, the "conservatives" still think a laissez-faire, "Sucks to be you," mindset is the way to go. This stuff has blast radius, people. The fact that I wasn't the crazy one, that I was fiscally prudent, will be cold comfort. We can all get hurt.

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