The KEY little Secret
Shhhhh. We don't have a credit crisis.......but please keep it to yourself.
We have a borrower crisis. There are simply not that many borrowers out there qualified to borrow money and those that are qualified don't want to borrow.
Over the last eight years.....much of lending was simply to businesses, governments and individuals that really didn't qualify to borrow money. But loans were made on the premise that more money would be lent to pay back the original lenders. As long as money kept being lent...everybody kept being paid....and the economy boomed.
Retailers sold lots of goods. Shopping centers were built. New homes sprouted up faster than tulips. Schools became monuments to local officials. Hospitals borrowed and built hugh new wings. All on borrowed money with tenuous financials.
Now you have to qualify to get a loan. Imagine that. Guess what....there are only a fraction of the people that would have been able to get a loan a couple years ago that qualify today. With less loans being made....spending is evaporating and thousands of businesses are shutting down.
Millions of employees are getting released causing even more people to enter financial hardship...even if they were responsible during the easy lending cycle. As revenues evaporate...expect more and more debt to default....likely trillions and trillions of dollars worth.
So what will buying a bunch of toxic assets off of banks books do to qualifying people to get loans....absolutely nothing. As a matter of fact, it only paves the way for more outstanding debt to become toxic down the road.
Now we know the truth....watch how this plays out. Until we figure out a way to restructure debt....the downward spiral continues.