Financial Reckoning Day Fallout by William Bonner

I wrote on this blog last Friday about the enlightening book by William Bonner and Addison Wiggin called “Financial Reckoning Day Fallout,” the revised and updated edition that was published this year.

Financial Reckoning Day Fallout: Surviving Today’s Global Depression 

I thought I would take a couple of quotes from the book that really hit home with me because I was guilty of what the authors were speaking about regarding home equity lines of credit, and how many of us used our homes as our ATM machines.  Hey, the truth hurts sometimes, but as long as we learn from them… 

Read this carefully, regarding home equity lines… 

Homeowners, thinking they were getting something for nothing, believed they were merely taking some of their gains off the table – like selling a few shares of appreciated stock.  Little did they realize they were selling the table itself… along with the kid’s bathroom and the family room.

If, for example, the house went from a $100,000 price to a price of $200,000, the homeowner may feel he can “take out” $100,000 of equity and still be living in a $100,000 house.  But what he is actually doing is selling half the house to the mortgage lender.  Even if the higher prices stick, he still has to live somewhere… and now he has to “rent” half his house form the mortgagor. (p. 46)

As time went on, more and more homeowners became gamblers, betting that property values would rise fast enough so they could refinance again, all of them forgetting one important fact: A house is a house.  It provides a service, but it doesn’t provide any more service if it is quoted at $500,000 than if it is quoted at $300,000.  Same roof.  Same air-conditioning.  Same everything.  Except, when it is said to be worth more, two noxious things result.  First, the homeowner can “take out” some of the equity and feel like he is still ahead of the game.  He doesn’t worry about it when prices are rising, when the loan comes due, he can always take out a little more.  Gradually, he gets deeper and deeper into debt.  And then, inevitably, his house goes down in price and he gets into trouble.

The other awful consequence is… (p. 48) 

Okay, I could keep on and on, but I have to stop somewhere.  I recommend that you pick up a copy of this book right away.  When you do, a lot of things going on in the economy today will make a lot more sense and you’ll be better prepared for the future by learning from our past mistakes, both as a country and individually. 

Once again, here is the direct link to the Amazon page:

Financial Reckoning Day Fallout: Surviving Today’s Global Depression

PLEASE let me know your thoughts by posting a comment below, whether you agree with the quotes above or not… 

Blessings! 

Mark