Quote:
Originally Posted by Paul Markham
People lived off the imaginary profit the banks made, in our standard of living, pensions and shares dealing.
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(I can't believe I finally agree on something Paul said....)
This is exactly what the problem was.
My two good friends are perfect examples. They both had average jobs, her working as a cashier for Costco, him in construction. Combined they made $80k a year. They bought a rather average three bedroom house, and somewhere alone the line they were able to live like kings - three week vacations in Mexico, a $40k truck, a jeep, a new Harley, jet skis, atvs, and a boat. They were living way beyond their means.
The truth is their house nearly doubled in value, allowing them to take out money. They leveraged the perceived value of their house, refinanced, and used the money to buy them nice toys. At a certain point the value of their house dropped, and being as he was in construction he was the first to loose his job. They lost everything, and had to sell off all of their toys at a huge loss just to get by. The only thing they still have is their big truck.