I wrote a little bit about the subprime mortgage troubles a few months ago, and mostly we’ve all forgotten about it. Generally Canada has been well-insulated from the troubles, and probably most people have yet to be touched by the crisis directly.
But anyone who thinks we’ve heard the last of it is wrong, I’ll bet, and anyone who thinks Canada will be fine if the US economy takes a real hit is even wronger.
Chris Penn writes about his concerns for the overall financial health of the the US of A in an aptly titled post: We really are in trouble in this country. This is just the beginning of it.
The United States doesn’t -make- anything any more. For the last 5 years, our economy has been driven by increases in asset prices, namely housing. People cashed out equity and spent like crazy, driving the economy forward.
All good things must come to an end, and we’re seeing just the first inning of the housing bubble unwind in a game that’s going extra innings. As prices drop, equity vanishes, and mortgage owners owe more than the property is worth.
Anyone who promises a fix for this situation that isn’t “we have to ride this out” either has something to sell you or is running for office. Don’t believe them. This financial crisis took years to make and it will take years to unmake.