Aside from home loans, there are significant problems with car loans, credit card loans, and student loans.
Essentially what happened is that over the last decade or so, as the Fed followed a policy of keeping interest rates low, lenders gave money to people who, in retrospect, weren’t the best credit risks. Housing was the most visible sector where this happened, but it happened in other sectors as well.
Now the solution that is being proposed (and followed by the current Fed) is…more cheap money. It’s as though the hangover is just starting, so we’ve got to get a few drinks under our belt in order to “take the edge off” so to speak.
I don’t know what the solution is, but I don’t think more cheap money is a good idea.
