Examples of the mortgage crisis compared to Bill Gates and the American Economy - FreeEconHelp.com, Learning Economics... Solved!

3/7/12

Examples of the mortgage crisis compared to Bill Gates and the American Economy

I recently finished reading an article about underwater homes (meaning that MORE is owed on the home than the home is actually worth) and it was pretty frightening.  According to the article about 30% of homes in California are underwater and almost 2 trillion dollars in mortgages are outstanding in California.  That is $2,000,000,000,000 to put things in perspective.  The United States government is in debt $14 trillion, and Bill Gates (the second richest person in the world) is worth only $56 billion!



To let you know how crazy the amount of borrowing and spending has become, it would take about 35 people with the same amount of money as Bill Gates to pay off all of the mortgages in California.  Fortunately, since only 30% of them are currently underwater --and in danger of default if people flee their mortgage-- it would only take 12 people with the same amount of money as Bill Gates to solve this crisis.


It is also quite amazing that the outstanding mortgages in California are equal to about 1/7 of the US national debt.  In fact, the outstanding mortgages in California have the same real value (in 2010 dollars) as the US debt had in 1980 before Reagen took office.

It is interesting to think that California is just one of the states in the US --albeit, the biggest-- yet it has so much value in danger of foreclosure.  Thirty percent of the $2 in mortgages at risk comes to about $600 billion.  This $600 billion may have to written off as losses if the trend of escaping underwater homes continues.  The best we can hope for is economic recovery and a rebound in housing prices before too many other people decide that defaulting on their mortgage is their best recourse.