We've learned that, no matter the severity of the crisis, we can live through it. We entered the dark ages of the dollar with our heads up and confident, and we emerged on the other side beaten, bathed in blood and with little left in our pockets. But the key thing here is that we emerged.
Alive. And free to do the same mistakes over and over again. After all, what didn't kill you once, will never kill you.
The 2009 crisis (I like to call it that because, at least in the automotive industry, that was when it manifested itself in its entire glory) was caused by a huge number of factors. Among them, one of particular interest to us: subprime loans.
You know, that's when you, a guy that can barely afford to take the family out for dinner three times a year, goes to the bank and says: “hey. I need a car" (need being here a relative term, because you actually don't need a car). The bank goes “how much does the car cost?” You go “that much” and the game goes on until the bank learns that there's no chance in freezing hell you'll be able to pay the entire loan back.
So what do they do? They do what any bank in the world would do, provided they do business with the likes of you: "here you go, mister No Good, go buy yourself a dream ride." And you walk away, happy and content.
Sometime before 2009, that was exactly what banks were doing with real estate properties. At the time, about 80 percent of US mortgages issued to subprime borrowers were adjustable-rate ones. Meaning that what you paid today was nothing compared to what you had to pay tomorrow. But that was a small price to pay, if you wanted the bank to accept you for who you were.
Obviously, since wages have a tendency of doing the exact opposite of what bank payments usually do, the whole burrito had nowhere else to go at one point than down the you know what. And from there, straight into the fan. What followed, you all know.
Someone with a bit of brains would have thought we've all learned something from it. That banks would stay away from subprime borrowers, and the subprime borrowers away from banks. And they did, for about a year or so.
Experian said last week that the subprime market in the auto sector is booming once again. The number of subprime loans in the auto industry grew by 11.1 percent in the first three months of the year, compared to the same period of 2010. And not only that more people who can't afford it buy cars, but they also buy more expensive cars: some $400 more expensive.
It wouldn't surprise me if the bad thing of 2009 became the bad thing of 2012, 2013 or 2020. And who's to blame for it?
No, not the banks. The banks are doing exactly what God, the government or the masons intended them to do in the first place: money. The sole culprit for all this is you, me, the neighbor, who all decide to get entangled in a debt that only a major catastrophe can ever erase. And for all intents and purposes, we will all be subprime delinquents, as they called them, in 2009.