[FF]

@ casamurphy, thank you, interesting pondering about different possible scenarios.

What I’m aiming for is the lowest risk option. Mortgage owners might get all debts absolved but I would consider that option extremely unlikely (given the background what happened here in Finland in the early 90’s with massive unemployment etc.). However, it is also very likely that the next crisis is so massive that it will make all the previous crises look like little bumps down the road. Therefore, it might be that because of a crisis which size is not comparable to any previous ones debt might be absolved. But then again, we are in the euro system here in Finland so the debt absolving option is not in the hands of our government.

If I didn’t sell my home and the value of it goes down dramatically (say +20%) and I had to move e.g. because of the need to change employer I would be in deep troubles. But, if I was renting I’d have more freedom to relocate + I could buy a house if and when the bottom has been reached in the housing markets (although the decline in Japan housing markets doesn’t seem to end ever so there’s no point buying a house at all).

I’ve been studying the monetary system for 5+ years and global economics by myself for a couple of years quite extensively and I believe I have a pretty clean view of the quite devastating outlook of our economic situation. I guess what I’m currently looking for is for some arguments that could shake my view and prove that my understanding is either wrong or insufficient. Because, to me, it is one thing to understand what is likely ahead of us and another thing to really act based on that understanding (in my situation, sell the house and become a renter; a very wise choice I would think but so hard to accept mentally and really execute it). After all, we are humans with a built-in will to believe in a better tomorrow, even when that is most likely not going to happen but the exact opposite…

[FF]

In debt deflation (amount of debt shrinking, i.e. less money in economy) asset prices drop. In another words, you could be ending up having more debt on your house than what it is worth. Might not be a problem as long as you don’t lose your job and can pay down the debt (and interest of course). But what if one ends up losing his job? This is actually a topic I would like to read more about: Should people try to get rid of mortgage debt and be renting? At least this is what I’m currently thinking about. Would probably do it if I was living on my own (i.e. didn’t have a family), would be far easier than with small kids..

I’m from Finland so I would say there are people across the globe thinking about this at the moment (well at least the “enlightened” ones).

[Author]

Posts