Auto Loan High Stakes Poker (TaxpayersIn The Pot)

Car LoanCongress created the 2008 financial collapse by forcing lenders toward high risk loans on housing. Too many of those were not repaid; that dumped losses onto the books of the lenders. The government papered over those losses with borrowed money, saving most of the banks. Never mind that the manufactured money was thereafter owed by the taxpayers, plus interest.

Now, car loans seem to be reprising the scenario. Cars are so expensive (averaging $32,000) that too few can afford them anymore One result: proliferation of 6 year and 7 year auto loans and rising loan defaults, recently around 5%.  The car prices are inflating while wages are declining. And politicians are pushing loans to less qualified borrowers, just as they did in real estate. (And still do.) A result: the worth of those loans on lenders’ books declines. It continues because after 2008, it is assumed that such situations are guaranteed by the taxpayers.

At present, every taxpayer’s share of the national debt exceeds $150,000 before interest is added. Not of course, including the auto loans. (Or the roughly 1 trillion in student loans.)

This teetering rockslide of debt has kept the auto makers in production. When it stops, production will stop for lack of buyers. We assume that, like the banks in 2008, the carmakers will be “too big to fail” and a taxpayer bailout will be the knee-jerk reaction. Again. But as the government is still in deficit, such bailout will have to be borrowed. Will anyone lend? Who knows? The politicians’ shell game is reaching some sort of end, seems to us.

Reality is arriving and things will never be the same as it does. The politicians who will be urging your votes so that they can save you from it … are the folk who have brought it down upon us. (Again!)

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About Jack Curtis

Suspicious of government, doubtful of economics, fond of figure skating (but the off-ice part, not so much)
This entry was posted in Economics, Goverrnment, Politics, Uncategorized and tagged , , , . Bookmark the permalink.

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