In truth, I think baby boomers looking for the free lunch way to save for retirement are the root cause of our repeated asset price bubbles in the last 10 years.
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IMHO, there’s cause and effect. Which is the cause and which the effect?
The Boomers (and plenty of Gen X and Y who joined them) could not have done this if the road wasn’t paved for them already.
If people were required to have 20% down; 30-yr, fully-amortized fixed rate mortgages; and max DTI ratios of 28/33% on **proven** income; plus six months’ reserves, etc., we would not have had this bubble.
Over the past twenty+ years, the answer to every problem in our economy has been to inflate our way out via credit/debt expansion, thanks to Greenspan.
If someone offered you a chance to make a million bucks, risk-free, would you take it? That’s how this was seen (and they’re being proven correct with all the bailouts to save the over-extended idiots). A free call option on housing. You win, and walk away with all the dough. You lose, and since borrowers didn’t have to put a single cent of their own money into it, they lose absolutely nothing. Maybe we’re the fools for not doing it, too.
