There’s a difference between credit and debt

I’ve been getting increasingly annoyed about the mainstream media’s coverage of housing and the economy. Someone coined the term “credit crunch” and it gets regurgitated in every single story that happens to mention the economy. The problem is the lack of credit isn’t the cause of our current economic woes, it is just merely a side effect of a larger issue at hand in our society. The real cause of this recession can be summed up in another cute, alliterative phrase: debt deluge.

At no other point in history have we been in more debt. We just keep piling it on. Loose mortgage practices over the past couple years made it easier for people, who normally wouldn’t qualify to take on more debt, to bury themselves up to their ears. Unsurprisingly, people can’t handle the payments on the debt that they’ve acquired. Instead of blaming homeowners, borrowers, lenders, brokers, banks, realtors and everyone else involved in pumping up the housing bubble, the media points a finger to the lack of credit.

At this point everyone is being dishonest to try and deflect blame and responsibility for the situation our economy finds itself in. Homeowners should have known better about jumping head first into a steaming pile of debt. Lenders knew giving inflated, risky mortgages to people, who only a couple years ago would have been laughed out of the bank, was wrong. The government turned a blind eye to their regulatory role since taxes kept rolling in. Realtors had no qualms about selling houses at prices customers couldn’t afford because they got their cut and washed their hands of the transaction. The media won’t admit their “house flipping” shows helped contribute to the mess.

Debt is the root of our problem and it will take some serious purging to heal the damage that has been inflicted. Jobs in financial services and construction are going to be hit hard. People are going to lose their homes and ruin their credit history. Home prices will adjust to a point dictated by increased supply and lower demand. Government has to adjust spending or increase taxes. The next time you hear a reporter or politican read “credit crunch” off the teleprompter just replace it with debt deluge.