But who really pays those formulas any attention when we are buying houses, cars or other luxury items?

Sorry to repeat myself, as I already cited this on the thread above, but Kevin Phillips explains the “delusional” behavior of the “banks” in painful detail in his latest effort “Bad Money”.

It probably wasn’t delusional at all. They thought that they had dumped most of the risk off onto the punters who bought their “mortgage backed” bonds. They were also pretty confident that the Fed, et al, would bail them out, which seems to be true. Can anyone say “Bear Stearns”?

He lists the total compensation of the CEOs of some of these outfits.

Crazy like a fox.

He also talks about how manufacturing industries fall into all of this. Not very encouraging for GM, et al.

Perhaps it should have read, if you can only afford 5 percent down, or zero, you should be renting, because reality is knocking now.

When you start giving out 95%-110% mortgages at 3% per year, your in for a world of pain when that rate starts to tick up.

The rule of thumb for ‘smart’ real estate investing is you at minimum you get ‘conventional’ financing…at least 25% down.

What has been lost on Americans (until recently) is If you make 60K a year…that doesn’t mean you get a $500,000 house, you get a $225,000 house.

Mortgage X 8% (the historical interest rate, plus small yearly payoff) Now times that by 3. That is how much your family income should be to afford your house. <—I understand how people can get carried away figiting with this ‘ancient’ math, but I didn’t think banks would get so dellusional as well.