The Auto Bubble is Growing!!

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Politics Chatboard

The Auto Bubble is Growing!!

by T.E.C. - Iowa

Jun 20, 2017

I have posted the graph at the bottom before, but things are getting worse. I had noted the seven year auto loans would leave buyers with negative equity that would lead to something similar to the housing bubble. Well the bubble is growing! Notice this from the article "This Toxic Trifecta for Auto Loans is Fueling #Carmageddon"

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Negative equity hits all-time record. The average negative equity in vehicles that were traded in for new vehicles during Q1 2017 has reached $5,195 per trade, the highest ever, according to Edmunds data, cited by AutoWeek. The percentage of trade-ins with negative equity has surged to 32.8%, also the highest ever! Average negative equity exceeded $4,000 in Q3 2013 and hasn't looked back.

(End quote)

Add to that:

(Quote)

The average new-vehicle loan term in Q1 2017 reached a record of 69 months, up from 64 months in 2011, according to Edmunds data. Terms between 73 and 84 months (7 years!) accounted...See More

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Long Time Lurker And Fannie Mae is increasing DTI to 50%. But, frijole is probably right! No one cares more about responsible lending than bankers. What could go wrong?

Jun 20, 2017

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T.E.C. - Iowa About "tec knows nothing about the world of auto loans", like duh! I am quoting people who know about such things. Read the article! Unlike Frijole, I do more then give my opinion. Plus, "free will" is not good if you want to be free to cheat people out of their money and then, as conservatives do, say, "It is their fault, they should have never li...See MoreAbout "tec knows nothing about the world of auto loans", like duh! I am quoting people who know about such things. Read the article! Unlike Frijole, I do more then give my opinion. Plus, "free will" is not good if you want to be free to cheat people out of their money and then, as conservatives do, say, "It is their fault, they should have never listened to me!"

Next is this comment, "How is it 'unregulated capitalism' when someone buys a car out of their own free will?" It is not the buying! It is the nature of the loan. Historically in capitalism and every other form, the lender is expected to do "due diligence" and should not make the loan if the buyer is likely to get in trouble. That is, the responsibility is largely on the lender.

This next one makes me think Frijole is not paying attention with this comment, "And you are dreaming if you think bankers don't care if their loans default, Its just your opinion."

They do not care, because the loans are bundled as auto-loan securitizations and sold to pension funds. This is a like duh, because this is exactly what the bankers did with home loans that cause the 2008 crash.

This brings us to Frijole's comment, "that's exclusively their fault." We can say that in normal times. However, when so many people are caught in an economic trap that it blows up the economy and causes a recession it is time to abandon your blind faith in the market and your blaming of the individual - that is, unless you like seeing bubble after bubble in your economic system.

Bubbles, by the way, involve allowing stealing to occur in your economy! Frijole would not tolerate a child stealing candy from a grocery store, but, in Frijole's mind, stealing from millions of unsuspecting adults is find, because Frijole says, "it's their fault!"

And finally, this comment "I suppose you want gov't to step in and protect them from themselves." We have known of the economic destruction from bubbles going back at least to the tulip bulb bubble, also called "tulip mania", of the 1620s. And yes, governments have tried to stop such bubbles. They try to prevent what Former Fed chairman Allen Greenspan calls "irrational exuberance."

Yes, when people exhibit "irrational exuberance", the government needs to protect them from themselves.

Jun 20, 2017

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T.E.C. - Iowa OMG, someone presents a problem, and your answer is do nothing because no one gets "to set the rules", because people have "free will."

You don't get it! Your legislature, both state and federal, meet every year to constrain your free will every more. There are reasons for this. It may be a population increase. It may be new technology. Or...See More

Jun 21, 2017

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T.E.C. - Iowa Well, that is not going to work! I asked Frijole how to stop bubbles in an economy and we get, "I'd tell people not to live beyond their means."

First, if that happen the American economy would collapse. The wages have been stagnant since the 1980s. The only way the economy has been able to continue is by people borrowing the money. The cu...See More

Jun 21, 2017

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