Are we scared yet?: America's house price time bomb.
It is impossible to know for sure how many of the people who are now walking away from their homes could have gone on paying their mortgages.
But Professor Nouriel Roubini of New York University, one of the first economists to warn of the dangers of the American house price boom, believes the number of people positively choosing to walk away is growing rapidly.
"This is becoming a tsunami of voluntary defaults," Professor Roubini says.
"The losses for the financial system from people walking away could be of the order of one trillion dollars when the entire capital of the US banking system is only $1.3 trillion.
"You could have most of the US banking system wiped out, so this is a total disaster."
On Friday I was with the accoutant preparing my tax return and he told me that I don't need to pay some of the bill until April 2009, to which I replied, "what the hell am I supposed to do with it between now and then?"
"Oh", he said, "if you are worried about spending it between now and then just put it in a term deposit"
No mate, I'm so tight I squeak when I walk, I can hang on to the $$ until then. I'm worried about whether the bank will still be there when I want the money back.
Now usually when I say something like that to a money pro I get the "oh god, another nutter" look. Instead of which he said,
Oh, I don't expect any of the big banks to go under by then."
From which I can infer
- He expects some of the smaller banks to fall over in the next 10 months
- He does not exclude the possibility that the bigger ones to fall over.
- It will take longer than 10 months
According to the BBC, Susan wachter and Nouriel Roubini agree with him.
Great.
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