As the U.S. subprime housing market continues its collapse, dragging down not only the broader U.S. economy but also many other economies around the world (including thousands of Ontario autoworkers who have lost their jobs in a recent round of layoffs), pause for a moment to consider the many layers of pain that are being experienced.
The U.S. housing collapse, most experts agree, was triggered by greedy mortgage companies offering mortgages to households that plainly couldn’t afford the costs. These subprime mortgages were then packaged into bundles of “commercial paper” that were sold around the world.
Why would anyone sign up for a mortgage that they couldn’t carry? Perhaps they believed the blandishments of the sales people, but mostly it’s because they didn’t have any other choice. The Bush administration, continuing a trend set by earlier presidencies, has refused to properly invest in a national housing strategy in that country – leaving the majority of low, moderate and even middle-income households without any option except to visit the local mortgage sharks.
Many of those piling up debt in their housing were signing up for subprime mortgages to cover medical expenses – another policy scandal in the United States that sees tens of millions of Americans without medical coverage, and many more with inadequate support from the privately-managed U.S. health care system (which, incidentally, chews up a bigger portion of the U.S. economy than Canada’s much more efficient national health care system).
A 2005 U.S. study reported that about half of all personal bankrupcies were due to health costs. More recently, there have been newspaper reports about low and moderate-income U.S. households that were forced into the subprime mortgage market to get the cash to cover medical bills.
Housing policy – health policy – economic policy: Ultimately, they are all linked and, in the U.S., are in a sharp downward spiral.