"But what they perceive as newly abundant liquidity can readily disappear. Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums" - Alan Greenspan, 2005.
4-7 million Americans will lose their homes in the coming months.
Given the fervour we are seeing in our housing market, I think the American situation offers many lessons. It has taken me a long time and plenty of reading to get a handle what is going on in the US. It is a tragedy for many Americans and can potentially turn into something ugly for all of us if Bernanke is not skillful at handling this situation. It reminded me of my cousin and her husband who bought a $750,000 condo on a household income of $5000 in 1996 at the height of our own property bubble. They had to endure alot of pain when the construction sector where they were employed slowed they saw their incomes falling.......banks hike interest rates to a whopping 8% during the Asian crisis they struggled to keep their home. They pulled through and are in better financial shape today but buying that condo burned a hole in their pocket that took about a decade to overcome.
The best video I've seen on the current US housing meltdown is an interview with Pulitzer-prize winning business reporter Gretchen Morgenson. For those who want to understand the current situation and its implications, this video is highly recommended: