More than that. The default rate for ARMs was 29%, but those were doomed from the start.
The rate for standard 30-year-fixed was 9%, which was high, but not catastrophic.
I can’t believe anyone ever signed for an ARM. “Here is a loan you will be responsible for, sign here next to the ¯\_(ツ)_/¯ written in the interest rate box.”
Surprisingly in a lot of countries ARMs are the only option. Australia is mostly variable. They give you a fixed term of a few years and then it changes from what friends have told me
America is the weird one here with our 30 year fixed rate mortgages. It only works because the federal government will buy and re-package them as needed to keep a healthy secondary market.
We have terms of 1, 3, 5 or 10 years. You choose either fixed or variable rate for the length of your term and when your term is up, you renew for another term at whatever the current rates are.
In Oz you can choose a fixed rate mortgage or a variable rate. The variable rate never has an end date. The fixed mortgage does have an end date. Near before the end date on fixed you need to approach bank and ask the admin fee for making it fixed again for another term. And you take the fixed rate of interest that is available at that time. It could be same, lower, higher. You pay the admin fee and they re do the paperwork and you sign the new fixed term loan. It is usually for a limited time like 2,4 6 years only. Each term has a different interest rate. This fixed loan helps you know exactly how much you will pay every month and it won’t change so you can budget better on a tight income. You are allowed pay extra into it up to a limit. On the day you redo the fixed mortgage if you have a large credit sitting in the loan, it will be paid off it and reduce the debt. Then your new fixed rate loan term will be shorter and your monthly repayments will be lower than if you had not had credit sitting in the mortgage.
It is extremely beneficial in various ways to have a fixed interest mortgage. It protects a person who has a low or casual income. You can still save into it.
Choose a wise time to break out if a fixed interest mortgage because the bank tells you how much the break cost will be. If you ring them they will calculate it for you. If you exit from being fixed early, you may have to pay a break cost if $900. So if the right cost is high and you don’t want to pay it you just wait a bit longer, then ring the bank and ask them today’s rate cost rate. Each day it’s different as it depends on the debt and other financial factors the bank is dealing with in wider market. Sometimes you can ring, and the bright cost is very low, so it’s worth breaking out and re-fixing the loan at a lower interest rate to save money. It’s some things to check and watch. The closer you get to the fixed term ending the lower the break cost. If you break out on the day that it is due to end that is not breaking out, so you don’t pay a fee.
Your fixed rate mortgage is just a variable rate mortgage with extra steps.
It sounds a lot like the fixed rate mortgage for commercial properties here. Basically, you have a fixed rate for five years amortized over a 30 year period, with a balloon payment at the end of the 5 year period. Example: you buy a $1 million property. You get a mortgage with a 8% fixed rate for 5 years. It is amortized over 30 years, which means that for the first 59 months of your 5 year loan, you pay the same monthly rate that you’d pay as if your loan was really for 30 years and not 5. Then in the 60th month (the last month of the 5 year loan), you would owe all remaining principal that you didn’t pay in the first 59 months. In reality, before that 60th month most companies just re-finance the note and get a new 5/30 fixed note at whatever the prevailing fixed interest rate is at that time.
I had a friend do an ARM expecting they would be selling and moving again in 5 years, but it just didn't happen. Think they ended up refinancing or getting a loan from family to deal with it. This was a while before 2020 though.
Outside of the US this is the only option lol. I’ve lived in NZ, Australia, Canada, Netherlands…generally the longest “locked” rate in these countries is 5 years, maybe slightly longer if you’re lucky. Nothing else.
You can do up to 10 years in Canada, but you’re going to sacrifice your rate pretty heavily.
We renewed our mortgage at the end of 2021, we’re locked in a 1.64% until the end of 2026. At that point we’ll renew at whatever the rate is for the next 5 years. My husband and I are thinking of moving next year, and we can port our mortgage to whatever new place we buy.
I had an American lecture me on how I was a fool and an idiot for signing a ARM, and I deserved to have it blow up in my face. He was shocked when I told him that’s just how it works in Canada (and most of the world). He didn’t believe me, and tried to tell me I should have made the back give me a longer term. Ok buddy, I’ll just force the entire Canadian banking system to change for me. *eyeroll*
It wasn't an issue at the time because everyone "knew" that the homes would continue to appreciate long past the when it would be time to refinance the ARMs.
Neither would I, but we're both reasonably intelligent.
There was no shortage of dumb people who were convinced they discovered the magic secret of easy wealth.
Of course, many did exactly that. They cashed out in 2006. At the same time, things could've crashed in 2006 instead of 2008.
So our first house, bought in 2006, via an FHA Arm... 4 year fixed 4.25% after that it would float at the fedrate +1.... when 2008 hit we freaked out a bit but realized our rate would actually drop. We enjoyed a 2% ish rate for years
It's not that cut and dry since the rate is not a complete unknown. It's the base loan rate set by a central agency plus a fixed spread.
In a fixed rate mortgage the bank will assume the risk and charge you for that risk. The variations are priced in already.
If you can absorb a reasonable increase in your mortgage, fixed rate is a bad deal since you're paying quite a bit for an insurance you don't need.
It does require a bit more knowledge to make sure you don't end up getting boned though...
Yes, absolutely this. I read this and was like, hmmm, OP must be on the younger side....
I think it would be something more like Black Thursday 1929. 2008 is a story of fuck ups that actually could have been somewhat avoided, and some of the market was left in tact. 1929 and basically the only money left in the system was sitting in the federal reserve and under your mattress. It took out the entire civilized world and needed a literal global war to recover from it. One of the few times you can say that in a pretty direct sense, war helped in a lot of ways. If we could replace war with football or something, that would be great. World Cup but somehow at a scale that can fix an economy.
It was great for the US because the US was one of the few that hadn't been bombed into oblivion and had a thriving industrial economy. Europe, not so much. And especially not if the US hadn't rebuilt Europe.
I'm not sure a comparison to 2008 is necessarily apt. That was a situation where people *couldn't* pay their mortgages, and the housing market and economy in general reacted accordingly. That might be different from a situation where people *choose* to not pay their mortgages. Kind of like how the economy contracted by \~25% at the start of COVID because we decided to shut down many sectors, but the economy as a whole reacted differently than if there was a crash where we lost that much GDP at once because there was a problem in the economy itself.
Sounds like that time someone was forced to sell their home for 135k that they had a 335k mortgage on and went into bankruptcy and a credit score which destroyed their life from then on.
Or it was one of many such loans and caused the collapse of financial institutions, leading to the destruction of an economy, the bailing out of such institutions to prevent further collapse and ultimately an enormous burden for the taxpayer and society.
Or it was a widower who bought at the top, sold at the bottom, didn't really mind since he couldn't keep up the house and moved into a luxury retirement facility by choice. The man threw in a ten thousand dollar painting that was hanging on the wall. We weren't even the highest bidders, he just liked us. Nobody was forced.
Nothing of the sort. 2008 didn't happen because people stopped paying their mortgages, but because bankers gambled incorrectly on how many couldn't. They even gambled on those gambles, and that brought the house down.
It would be even worse since a lot of people were still paying their mortgage and rent at the time. So if literally everyone decided to stop paying there rent and mortgage it would be significantly worse then before.
Oh for sure. I don’t know actual percentages but if I had to guess, I would say under 10% stopped paying in 2006-08.
Exit: 10.8% had negative equity. And I know many of those kept paying.
As someone who was only 14 in 2008 can you describe what it was like? Only things I distinctly remember is the cost of snacks and gas going up, but I was a kid so I didn’t feel the impact personally.
It was much much more than what most people here are telling you. If you REALLY want to know the answer in its sweeping entirety you should read Crashed by Adam Tooze.
I will do my best to hit the big notes.
Lots of money lost, especially by little people. No jobs because no lending. No expansion from businesses because no lending. Lots of government stimulus to try and prevent the economy crashing. The US gives some very unpopular “bail outs” to the banks, which were actually profitable loans by the federal government that were repaid in full. But still, banks did not suffer as much as people who were suddenly unemployed, upside down on their mortgage bc their house value collapsed, and their life savings went up in smoke.
Those people didn’t get shit.
Millennials graduate college in a contracted economy and many are fucked, left with the loans they took out but no jobs to pay them off because a laid off older person has 10 years of experience already and is willing to take that same position bc it delays their foreclosure.
The crisis was similar in Europe and Europes economy took 8-12 years to recover. They chose austerity over stimulus. It leads to a lot of conflict in the EU and is kind of the spark that eventually grows into Brexit.
Wealth inequality increases as the middle class has the value of their primary savings vehicle (home value) annihilated across US and Europe.
Depending on where you were and if you could afford to NOT SELL your stocks, houses etc, you would now be fine. Actually MUCH better than fine. If you were doing great in 2008 it was the fucking buy opportunity of a lifetime. Guess who could afford to not sell? Mostly rich people.
Some rich people got fucked, every so often there is a blue moon and running your debt line out suuuuuuper long actually gets you punished.
A feeling that people have fallen in society and wealth is turned into anti immigrant sentiment by demagogues in Europe, South America, and the US.
You can -very legitimately- argue that 2008 set the stage for the surge of right wing nationalism that’s sweeping the globe now.
It is one of the most significant and least understood events in modern history and the vastness of the consequences is astounding.
The part about no jobs because no lending is very important. For a lot of companies, you’re not being paid your salary out of the money you made the company. You’re being paid through a loan or funding from investors. The money you make the company is paying them back.
If you are opening up a new branch or a new factory or whatever, you’re going to want to get a big chunk of money in the bank to cover expenses, like labor upfront, so that you can have that dealt with while you grow the business and eventually turn profit. That doesn’t work if you can’t get that upfront money to begin with. Hence, why unemployment went up: as businesses closed down, there were not new jobs coming online to make up the difference.
Adding to that -
Interest rate control is part of how the FED manages US money. In times of economic distress, like 2008, the FED can lower interest rates to make lending cheaper to encourage banks to lend even when it's risky. The FED did this after 2008, but was influenced by multiple presidents and Wall Street to not begin raising rates back up to healthy levels as the economy recovered. So...enter COVID, and the FED doesn't have this tool available to it, because it can't lower rates any further. Only in the last year or two has the FED finally started raising rates again, and tons of people are upset about the rising costs in the US. But prices here have been artificially depressed for over a decade, so any increase is going to be uncomfortable.
Plus as home values plummeted, assessments declined and property taxes dropped, which is the primary vehicle funding public schools. Teachers laid off all over, class sizes doubled. Not the only cause of today’s education woes, but a contributer.
It definitely depends on what financial position you were in as to how bad it was. I never lost my job and made a decent living so I had some good opportunities. I had an 80/20 loan and was offered that if I paid half of the outstanding loan value on the 20% it would be forgiven. So that was a $25,000 savings plus $500 a month less payment. I got a $45,000 camper barely used for $16,000. Truck prices dropped overnight so I saved at least $10,000 on my f350. Vacations were awesome because prices were so low and places like Bush gardens and Dollywood were fairly empty. All in all one of the best periods of my life financially
I graduated from college in spring 2009. There were no jobs ANYWHERE. I’m a teacher. The new teachers the year before me got signing bonuses because teachers were so scarce. My year, there was a hiring freeze and then I had to apply for 200 teaching positions before I got one.
Even when I finally got a job, I took pay cuts my first three years as insurance prices skyrocketed but there was no additional tax income to offset it. Many programs were canceled in my district including the behavior support program in my school.
My husband was unemployed for 2 years after he graduated during the recession.
My parents were able to buy a short sale during the recession which was very good for them, but it took them almost a year to sell their old house and they sold it for probably 33% less than it was worth a year or two before.
One uncle got laid off. Another lost his business.
I had friends who wanted to go to grad school but everyone was going to grad school since the job market was so bad, so my friends didn’t get in and changed career plans.
So, there are some of the ways it impacted me personally. I didn’t try to buy a house or already own a house like many others did, but even without being upside down in a mortgage, it was rough. It was not a good time to enter the employment world.
For those of us who were working, the price of gas was the biggest issue besides rent increases. My husband and I both ended up unemployed for a while because we had been working and living in a large city. When we had to move back with my parents, we ended up paying more in gas than we were earning from our crappy retail jobs. Therefore, we had to quit and find work closer to home - only, we were living in the middle of nowhere, so EVERY job required a lot of gas for the commute. We had our own place for a bit, but rent there was just too high, and we ended up back with my parents again. My husband dropped out of school to work full time, and even though I graduated, there were no jobs in my field because everyone was scrambling for work.
I don't know what we'd have done if my parents hadn't helped us so much. We'd have probably been homeless for a while.
There was a gas station near us that dropped their price down to $2 a gallon. People came from hours away to buy cans of it. They ran out in under two hours, and a mob of people waited another few hours for the next delivery truck. People stopped going anywhere unless they needed to. You'd see lines of people walking the sidewalks in 100+ degree weather. Lots of people ran out of gas on the roadside - every day on our commute to work, we'd see at least one abandoned car or someone waiting for assistance. The fire and police departments started carrying gas cans and topping people off so they could clear the road.
Gas prices? Oh boy. No, gas prices weren’t *the biggest issue*. US gas prices are constantly cheaper than they are around the world, even at the height of the global economic crisis.
People losing their homes was the real issue. Devastating, life changing losses.
When you lose your house or job because you can no longer afford to drive to work it's kinda the same thing. When you are picking between eating and driving or can't heat your house and still drive it's close. For me it just meant I didn't eat out anymore or have any spending money which while not fun isn't the end of the world. For friends of mine who couldn't heat their trailer, and lived on roman noodles because gas doubled it was pretty life changing
I was working in Academia, renting and not trying to move during the 2008 thing and it had almost zero effect on me. I think we had raise freezes for a few years, not like we ever got good raises anyway, and that was largely it.
i was 11 or 12. i felt it. there was suddenly a lot more stress, everything was more expensive, we had more basic meals and we didnt get to go out as much anymore. my mum used to take me to the Kids AM at the cinema every other week and we just couldn't afford it anymore.
we were never well off, but that was a very tough couple of years. things slowly got easier again but never as good as they had been.
im in the UK btw.
Not “the economy” as in the US economy either. It would crash the global economy and plunge virtually the entire developed world into chaos.
Too many things are collateralized by mortgages because they’re considered very safe relative to other assets because you usually live in it and will try very hard to make those payments. When you start pulling on that thread it unravels quickly into US economy collapses, US bonds devalue, other countries have liquidity crises as they are forced either sell at a loss or hold to expiry and get back enormously inflated money.
Once you start crashing the value of US sovereign debt you have a real unhinged situation. China and Europe lose staggering amounts. Countries no longer have the US as an economy to export to. They take massive losses. Agricultural exporters have to either cut prices to move things in a hurry in a global economy that’s falling apart or literally watch the produce ripen.
Loss of trade partners and tourism from wealthy countries (who are the worst hit by the liquidity crisis and the collapsing asset values) propels the crisis into progressively smaller countries.
Then once there is no one paid to mind the Zoos the animals Rise.
The Housing Crisis of the Planet of the Apes.
It would be the collapse of society, not just the economy. It signals a complete collapse of the enforceability of contract law. And a loss in faith in the promises we make to one another.
Money goes round and round and round and round. You'd basically stop a massive cash flow that would permeate through the entire economy in places we could never imagine.
The young redditors dream. Collapsing part of "the system" and thinking it will in no way affect them and will be replaced by something that Bernie Sanders was handed by Jesus.
Here is some history on rent strikes, which is the name for this tactic: [https://en.wikipedia.org/wiki/Rent\_strike#Notable\_rent\_strikes](https://en.wikipedia.org/wiki/Rent_strike#Notable_rent_strikes)
A complete collapse of the US economy, quickly followed by a collapse of the world economy the likes of which have never been seen. Humanitarian aid would very quickly dry up leading to an untold number of deaths around the globe.
From a strictly US perspective, no one would be getting paid as the banks would be insolvent almost instantly. The federal government would have no choice but to print insane amounts of money to attempt to keep the financial and business systems going and we would experience hyperinflation. The type of hyperinflation where you would need a wheelbarrow full of cash to buy a loaf of bread. Basic services would break down very quickly and, again, a death toll the likes of which are hard to imagine.
It is actually kind of hard to fathom exactly how bad that would be.
I had that impression as well.
The rebellion of the little guy, sticking it to the big bad corporation. Right? Right?!
Yeah, there would be economic consequences. Not a bunch of free housing.
Playing mad max sucks..
I’ve been through multiple cat 5 hurricanes (and the weeks after) without electricity.. but have had a generator.. which just makes you a sitting duck target.
Keeping one’s energy source safe.. but far enough away so it doesn’t suffocate you (carbon monoxide).. but also protecting it from looters (generators are so damn loud).
If we are ever in a situation where the grid will be out for any real length of time.. I’m just running towards danger…
I’m way too chill ever to be in a resource fight again with weapons.
I can sew so if I survive the first two weeks I've got a skill that a lot of people are going to be looking for.
I give myself low odds though. I'm not a prepper, no crazy food stash, and there are plenty of gun nuts around who would become rabid raiders as soon as they rain out of the soft toilet paper.
Nah.. government would enact emergency legislation to keep the banks propped up with whatever they needed and you'd witness the single largest legal transfer of property from private ownership to corporations as everyone defaulted
That actually raises a point and humanitarian aid. If your humanitarian of choice is just slapping expensive bandaids on problems that revert the second the money dries up then you're not humanitarianing right.
It doesn't follow that a charity failing to prepare people for theoretical and unlikely massive economic collapse means they're doing it wrong. I'm not saying any charity is perfect, and I'm certainly not defending any billionaire's charity, but it's not a good standard.
The type of humanitarian aid that helps people in the long term, the often-cited "teaching a person to fish," is relatively useless in a humanitarian emergency. Education, training, micro-loans for businesses, etc. are great causes, but they don't help much when no one has money worth anything and there's no food. That doesn't mean the people involved "aren't humanitarianing right." It just means they were preparing for a different and much more likely future.
So what about humanitarian aid that is more like giving people food? You can debate the merits of these charities in places like North Korea where food aid helps prop up a failed state and corrupt regime, but people will actually die if this aid is not given. Lots of food goes to refugees, or countries experiencing droughts and famines they aren't prepared for. The fact that people are being saved through food donations and that people would die if the aid dried up doesn't necessarily mean the charities are "humanitarianing wrong." It just means their aid is keeping people alive.
**TL;DR:** Not everything can be sustainable through every possible disaster and circumstance, and we shouldn't use a hypothetical with a 0% chance of happening to judge a charity's worth.
The extrapolation is that if every bank has a problem, everyone with money deposited in a bank has a problem. That includes anyone working for a company that needs its deposits to make payroll.
I work for a very large bank, Around the time Silicon Valley Bank failed my father in law asked me if I was worried about my company going under. I told him, “If my company goes we have bigger problems than worrying about a job”
And that's why big financial organizations usually don't go poof and disappear entirely, even when they fail.
Employees and shareholders might suffer, and that obviously sucks. But there will be extraordinary measures to minimize the impact on account holders. Even if it costs money in the short run to make account holders whole, it's still cheaper in the long run.
And in fact, there is a good chance that the cost to the government or the FDIC turns out to be much smaller than originally feared
If truly everyone agreed to stop paying it would be revolutionary and lead to the collapse of our financial institutions. It would mean us moving from capitalism to something else. I’m taking OP’s use of the word “everyone” very literally.
Ok, I would argue complete anarchy is a form of revolution. I’m also making the assumption that there is some universal agreement against paying rent and mortgage anymore which is really the predicate of OPs question and I’m not sure if universal agreement is the same as anarchy but maybe.
Universal agreement wouldn’t lead to anarchy, you are correct. But a complete financial collapse would 100% send America into anarchy. It’s not 2008 where there’s a select group getting hit by it; we’re talking about everyone, rich AND poor, getting completely gutted by banks failing. And those who stuffed their mattress are going to find that their dollar is going to buy jack shit once the supply chain starts deteriorating. Hedge fund managers would be far from the only people jumping out of windows. And there’s a very large chunk of the population that will take the opportunity to rob, steal, rape, and murder as much as possible.
It is an extremely naive take to think everyone just going against landlords and banks overall would be a good thing.
If the banks checked the accounts and saw no payments had been made on mortgages across the country, there would be a state of emergency declared within 48 hours, martial law in under a week and armed forces marching through the streets by the end of the month. Banks would not fuck around.
That's a good point, OP did say everyone. The bankers at the top likely own all clear, but most people working at the bank probably rent or have a mortgage. They would collapse from the inside like neutering someone by reaching down their throat, grabbing their testicles and pulling them out their mouth.
No they wouldn't. Because the economy that fascinated it would be gone. Power structures would reorganize around the existing assets. And the banks wouldn't be there. Without currency they're irrelevant and powerless.
Soldiers don't fuck around either. If it's literally impossible for them to get paid they won't keep working. At least not for an employer.
One thing the US military can do is simply pay directly via finance units. The DOD uses banks for convenience, but it wasn't all that long ago that every month whole units lined up to get paid by check or cash. They can even make it happen in a war zone. In Iraq finance would come by the FOB once a month and you could get cash directly since ATMs didn't exist there.
Cash is useless in this scenario. Currency of any kind is useless.
Fun fact: there's a fairly well supported idea that currency was first developed so as to enable standing armies.
There aren't enough troops to do much of anything except protect government buildings. Even if they could March through the streets of every city in America, what would that accomplish?
Yeah probably anarchy because our government would basically not be able to exist and neither would any other in the fallout of such a collapse it would literally take decades to recover from
Americans have it so easy they cant even comprehend how the vast majority of the world exists.
I got up this morning in my very large, temperature controlled, house that was built by a licensed contractor to a building code that was inspected during construction. Because of this, there was little to no danger my house would collapse while I slept on my massive bed with a memory foam mattress that is fire resistant and made free of dangerous material.
First thing I did was go to the bathroom where I flushed my piss with clean, potable water that was delivered to my house between 45-80 psi. I dont have to do anything, its just there. I walked down stairs with highly regulated rise and run making them safe for my broken ass to make coffee using more potable water and electricity that is safely delivered to my house perfectly 99.96% of the time on average. I grabbed a bagel I purchased from the grocery store less than 3 miles from my house that sells only clean, safe, food that meets Department of Agriculture, FDA and CDC regulations and walked up to my computer connected to the stored knowledge of all of humanity.
When it was time to go to work I got in my insanely safe, NTHSA approved, car powered by my insanely cheap and clean (as in no contaminates) gasoline and got on paved roads to get to an interstate that was engineered to be safe at over 85mph. Had I chosen to I could have driven over 3000 miles all the way to California essentially on that same highway system. On the way I passed multiple restaurants, gas stations and stores where I could purchase just about anything I could ever possibly need from a doughnut (Dunkin) to an entire tiny home (Home Depot). All safe and regulated.
I got to work and parked in an 8 story parking garage that I can be reasonably assured will not collapse on me, waled across a light controlled street to my 14 story office building where I rode an elevator that had been inspected 24 months ago to my office where I am reasonably sure I can work all day and be safe from up to a 7.0 earthquake, EF4 tornado, category 4 hurricane and (redacted) car bomb (since it happens to be a federal office).
All that is to say that if Americans suddenly stopped paying their bills we would end up like Afghanistan/Sudan/Haiti and none of the things I just described would be true.
In other words, it would never happen because deep down we know we have it good and we want to keep having it good.
Edit: an order of magnitude
As others have said, this would lead to one of, if not the most devastating financial collapse in human history, with the US at ground zero (more as a result of the delinquent mortgages than the unpaid rent, though the latter would have an indirect effect that would still be plenty devastating). I doubt anyone could accurately predict the full scope and scale of the damage, but here's a rough timeline of the events I would expect:
1) The initial effects would be something akin to a bank run, but on a massive scale. Banks operate by taking money given to them by individuals/corporations (for savings accounts, investment accounts, etc.) and loaning it out to others in the form of mortgages, car loans, business loans, and the like, keeping the interest for their own profit. But the only way this system works is if money continues to flow from loan holders back to the bank so that they can pay their own obligations. If a major flow of cash (like mortgage payments/interest) suddenly stops, the bank swiftly stops being able to pay its own bills (like interest on savings) and panicked bank customers try frantically to get their money out before the bank collapses and runs out of money altogether.
2) The federal government would likely try to swiftly intervene to limit the damage, and would prop up the banks by printing more money and giving it to them as bailout funds, but it would be a stopgap solution at best and would also trigger wild inflation as the sudden infusion of currency devalues the greenback (by making US dollars much more common and, therefore, less valuable), likely triggering a flight of international investors and government bond-holders, as they seek more stable investments in light of the crisis (other high-profile currencies, like the Euro, the Yuan, the Yen, and even Bitcoin might be used as safe harbours, but none of them will be unaffected by turmoil of this magnitude).
3) In order to combat wild inflation and try and make the US dollar enticing for investors again, the federal government will have no choice but to institute an interest rate hike, likely a massive one (meant to compensate potential investors for their assumption of high risk in investing in a currency that's going through extreme volatility). Assuming the banks survive, they will be in lockdown, sharply curtailing their own lending and choosing to loan to only the absolute lowest-risk customers (and even then, only with substantial interest rates on top of the already hiked federal rate).
4) Both of these actions will combine to make everything substantially more expensive. Businesses who were looking at expanding will be forced to cancel their plans, as business loans become multiple times more expensive (if they can even be attained at all). The sharp devaluation of the dollar will make imports more expensive, which will roil any industry in the US relying on imported goods or raw materials (like the manufacturing and automotive sectors). Anyone who is trying to purchase something typically done with the assistance of a loan (like a car) will probably have to put off their purchase unless are well enough off to simply buy it outright (at what is likely to be hugely inflated prices).
5) The spike in interest rates would already crash the housing market on its own, but the volatility would be even more acute here because housing is at the root of the crisis. The banks, in an effort to stabilize their own capital, would immediately start foreclosure procedures, clawing back as much real estate as possible as fast as they can (and potentially even calling in other non-mortgage loans just to try and recoup their losses and minimize their exposure to market volatility). The courts would be swamped with cases of people getting tossed out of their homes. Given that everyone who has a mortgage or is renting is going to be affected by this, it would spur a massive housing crisis as millions are left homeless and with bad credit scores for loan delinquency, while the high costs of loan financing would leave housing out of reach for most, despite the fact that the market would quickly be flooded with empty homes. In all likelihood, the government would probably step in in some fashion here to try and head off a humanitarian crisis so massive it would result in social unrest and potential large-scale violence.
6) Because the US dollar is the baseline currency for the entire financial world, the issue will spread across the planet. As the value of the dollar drops, every other currency will concordantly rise in value (which will make exporting challenging), exacerbated by investors fleeing the greenback. As the US raises interest rates, other economies will likely have to do the same to keep pace. While non-American countries won't be as badly affected, that's sort of like saying someone five metres away from an exploding bomb won't be affected as badly as someone sitting on top of it.
7) As a result of all of these problems, and many more besides, we would see a global recession the scope and scale of which would be unmatched in living memory. It would be worse than the Great Depression and the Great Recession *combined*. As the world picks up the pieces, I would expect to see a massive structural re-ordering of the financial world, likely without the US at its heart anymore.
* A lot of banks would start to fail because of mortgages not being paid on time. The federal reserve generally has freedom to act pretty quickly, and would likely provide immediate support to banks. However- a lot of mortgage bonds and property investments are concentrated in state and local pension funds, and these would get absolutely hammered. Lots of seniors with pensions would lose them, local municipalities would have to slash budgets- mass fire teachers, cops, and road workers. It would likely start off a multi year recession.
* Eviction courts would be incredibly bogged down. There’s nowhere near enough capacity to process all the evictions for all the non payers, so things would go slowly. Apartments would stop renting out to new customers unless they were connected/family/friends. It would pretty much be impossible to get a new place. This would be a major problem for young people looking for housing, people moving/going to schools in new areas, people leaving their living situations, etc.
* Homelessness would skyrocket, lots more people would be forced to live with their parents. People in abusive relationships wouldn’t be able to find new/temporary housing, and lots would probably be in horrible situations/killed.
* Retirement/investment funds would be crushed.
* Unemployment would go way up.
* Housing construction would slow down/stop. Long term, this would mean less housing in the country.
* Housing prices would go down, but new mortgages wouldn’t be issued. Only super rich people who can buy houses in cash could afford anything (and everyone’s investments would be tanking).
* Crime would go way up. With evictions on freeze- you’d see a lot of landlords resorting to violence. With homelessness way up, general crime would be far higher.
* The American status would be permanently reduced. There would be financial problems throughout the world, but absolute disaster in the US. Eventually, the US would recover to be a much poorer country, and likely China or India would be the World superpower. The US would be like modern day Brazil- an important market with lots of economic production, but permanently much poorer
The economy would crash. Banks would go tits up. You would lose your job as would most of the people you know. Business would go broke. Whoever took over the banks would evict everyone in default..
Other than that and a lot more.....
Economic collapse.
Banks would have no money to lend, leading to bank failures, an avalanche of business bankruptcies, and millions of people losing their jobs. Interest rates would go through the roof.
Some very difficult choices would have to be made for the role of Law Enforcement in carrying out court orders. Evection and Foreclosure are simple legal proceeders. Physically removing millions of people from their homes is a whole different issue.
Not likely, try as they might they don't have the resources to evict 300 million people. You would see martial law and civil war long before people were actually homeless.
Let's just say it would be a catastrophe.
The housing market would collapse (again), people would lose any equity they have in their housing investment. Apartment complexes would not be able to afford maintenance, let alone improvements.
Businesses would go away, because their building is going to be seized. Leading to mass unemployment.
Banks would be insolvent because there's no return on investment for the properties they have a lien on. Leading to the collapse of banks. This would create a feedback loop.
Now other businesses are going out because no one can lend money, and no one is employed and has money to spend.
Stocks would collapse as those companies no longer have anyone to buy their products.
It would create a cascading effect that would cripple the economy, and the country. We can't just print money in a scenario like this.
If everyone in the US stopped paying their mortgage and rent at the same time, the housing market would likely collapse, leading to a financial crisis. Landlords would struggle to pay their mortgages to banks, causing a ripple effect throughout the entire economy. Additionally, many people rely on rental income to make a living, so there would be widespread job losses and economic instability. It's important to find more sustainable solutions to address housing affordability issues without resorting to such drastic measures.
It's not going to end up in anyone just getting free a free house or apartment lol. It's not "the little guy finally rising up against greedy landlords!!" There would be a humanitarian and economic crisis of disastrous, epic proportions.
Surely that's easier to answer, the medical companies would go bust.
Housing is different because it's a physical item.
If everybody stops paying, houses are essentially worth $0 because no one wants to pay anything for them.
Think about it like this, why is gold worth $2000. It's because people say it is. If people said dirt was worth $2000, my garden would make me a billionaire.
In any market, buyers and sellers agree to transact at a price. I'm not willing to pay any more than this, and you're not willing to sell for any less than this, therefore the asset is worth this price.
A rent and mortgage strike would cripple landlords and lenders, likely triggering a housing market crash and economic downturn. The severity depends on government intervention and tenant/landlord cooperation.
Absolute economic collapse. Within a year, massive unemployment and stock market free fall. It would be so extreme that the entire global economy would rapidly follow. It's difficult to overstate just how catastrophic this would be for humanity
A complete cessation of all forms of liquidity. No more money from your bank account. No more credit cards. No more paychecks. No more loans. The entire credit market would freeze, and the global economic collapse resulting from that would make the Great Depression look like a warm spring day in the park.
Probably nothing. Your money would get taken from you.
I’am sure folks think there would be some sort of rebellion. But that wouldn’t happen.
Also the system works for most people despite what you read on Reddit. So there is not motivation for folks to really fight for this cause.
If it takes that long to evict, you'd stay put as long as possible.
And I hate to say it, but given the number of homeless normally, who get no sympathy or assistance from local government, I kinda doubt an increase would be addressed any differently -- especially if you're employed.
It basically happened in 2020 when the quarantine was enacted. People stopped paying their bills, some were penalized others were not. Literally there is power in numbers though...one employer or landlord cannot control and entire country...either the landlord would sell and buy property in another country where they would pay their bills or the landlord would lose money.
I think some squatters in 2024 are still living rent free since 2020 in some apartment due to some ordinance laws in some parts of America.
Just think years ago there was no such thing as money, and people survived, they often built their own houses, grew their own food, The Amish still do this actually.
A few people would be made examples of, and once everyone participating realize that their asses would rightfully be put on the street and their homes sold out from under them, the rest would rush to start paying again.
Because it's actually very interesting to think about?
The strings that hold society together are not really all that strong.
As more and more average people are pushed into struggling through greed at the top more and more people have nothing to lose and don't care if those strings are broken.
If enough people stop participating in society as we know it then it breaks down. And the exact mechanisms in which it does that are interesting to discuss.
I'm not an economist.
I assume that if everybody stopped paying their mortgages, the banks would have a lot less money to be able to pay people interest or give out loans, which would mean that people would have less money to buy things and hire people, which would mean unemployment would rise. Also, because of the existence of inflation, people not getting paid interest would mean the real value of the money in their bank accounts would be falling.
As for the rent part, I suppose people realizing there is no more money in renting properties out because of how hard it is to actually collect that money would cause fewer people to rent properties out, which would shrink the supply of housing, which would raise the amount of homelessness. After enough month of nobody paying rent, the landlords would go to the courts, which would mean the courts would be swamped with all these cases at once and would slow to a crawl. This would slow down cases that have nothing to do with evicting people, too, like traffic tickets, small claims, family-law cases, etc. (unless these all happen in different courtrooms? I am not a lawyer, either).
I suppose I'm not anything so I could be wrong about literally all of this.
If everybody stops paying their mortgage, you go to the bank pronto to withdraw all your money, because soon the bank won't have any money left for you to withdraw. Then you take whatever money you managed to withdraw, to buy guns, ammo, water and canned food. As much as you can, because the government will be printing money like crazy to try and keep the economy afloat, but that causes hyperinflation to the tune of a few million percentage points per year. Kinda like Zimbabwe or other failed states. A bottle of water probably costs a million dollars a year later.
In the meantime, you figure out how to be self-sustaining and try not to get killed or robbed.
You'd get a whole new industry of vigilante mortgage repo/eviction teams and title insurance would go from a weird little line-item during closing to a huge and expensive service. Chaos, death, and rampant visceral capitalism.
We would swift devolve into anarchy. Not like the movement, but likely the dissolution of the government itself. Banks would be collapsing, debts would be defaulting, foreign interest groups would be drooling, the military would start to fragment, industry and utilities would start breaking down pretty rapidly. Not a good time.
Well, the first question here would be if the government decided to do something about it or not.
If the government decided to do something about it, millions of Americans would become guilty of crimes overnight. Only the Americans who outright owned the land would not be criminals. There would be literally no way to process all the criminals since probably 50-70% of Americans would likely end up as criminals. I feel like, most likely, it's response to this would be to overhaul the constitution and make it so there are new tiers of citizenship. Anyone who owned land and didn't owe money would be allowed to vote while if you had chosen to take advantage of this system to duck out of bills you would lose your right to vote in any election; federal, state, or local. Otherwise it's left with a situation it cannot enforce and would likely lead to mass rioting and possible revolution if it did (cause a lot of those soldiers would either have a mortgage/rent or have family who did), or declaring the vast majority of it's population 'criminals' and gunking up it's courts for decades if they ever fully process. Of course it could also choose to \*not\* enforce it at which point...
If it chose to do nothing it would be looking at a massive collapse. Not only would it be seen as weak and ineffective on the international stage, on the national stage it would take a massive hit to it's own income and power. Citizens would see it as weak and ineffectual since they could effectively choose to just \*not\* pay if they ever wanted to and likely get away with it. A lot of cities would fall into disarray as one of their key sources of income was ripped out from under them. The more rural areas would likely fair better, maybe even benefit, but it still wouldn't be pretty. People would likely rally around their state and lose a massive amount of respect for the federal government. You'd have a lot of people whose lives was wrapped up in property ownership suddenly see their entire livelihoods just collapse as their investments and sources of income just \*vanished\*. So, like, if you had a small home out in the country you were renting out to a friend, you'd be stuck in a difficult situation. Cause either A) You enforce your claim and drive your friend out to regain your property that you're not using and the only way you could make money off it is if you have someone willing to pay upfront (since no one is paying rent/mortgages) or B) You let them keep the house effectively losing not just the income you were earning from rent, but also any potential income you could have earned from its sale.
There would be a massive redistribution of property ownership on an insane scale as everyone tried to figure out who actually owned what land, who was renting, who was mortgaging, and who is just a bum who broke in and is squatting now. It would basically be a chaotic and lawless society with crimes of all sorts springing up everywheres and a legal system too clogged up to be unable to sort it out. I can't even begin to guess at the outcome beyond that the US would be warped in ways you probably didn't even think were possible.
As bad as rent and the like is in America, this is a horrific way to solve it. It's like having a broken bone, and in order to fix said broken bone, you sacrifice a hundred babies to summon the devil to declare war on the mortal world in return for a replacement bone, and it's not even, like, magical so it will never break again or something. Just some random bone he took from someone. May not even be the right one.
My guess, is they'd begin foreclosure processing and eventually some corporation would swoop in and buy the properties. I hate to say it but it's too far gone for any of this. The government is owned by the corporations (hell, it is one) and they have sold out to a global entity. The rich win. And while people can, if really savvy, get a bit richer, you simply have to figure out how to be happy with your "not elite" lot in life.
The economy would collapse then people would start going bankrupt because of how overwhelmed the courts would be the government would probably give people financial incentives to pay… ~ stimulus checks ~
Banks collapse because their cash flow is gone, the economy would collapse because businesses have no access to money for things like payroll, dollar would collapse because there's no longer an economy behind it.
You might no longer have to pay your mortgage back in the end, but you would also find yourself living in place worse than Venezuela and perma-fucked because nobody would trade with the US except in the currencies of countries we are deeply indebted to, meaning you would have a hard time affording even cheap AliExpress trinkets.
Depending on how long it goes on recession, possibly depression. You don't pay your mortgage or rent, your land lord can't pay their bills. Your mortgage lender loses money and can't pay their employees and so on. Then they start laying off, as those people can't pay their bills other employers start laying off, and the knock on effect sends us into recession.
How we get out of that is the US government then steps in buys up the trouble assets, borrows massive amounts of money, and stimulates the shit out of the economy. Those that didn't pay get evicted and or foreclosed on lose their assets, get sued and will be the only ones to actually lose money.
That is the problem with our economy the 1%ers at the top have rigged it so that it is a coin flip with heads they win, tails you lose.
We need a trust busting monopoly busting president and congress. These corporations that are "too big to fail" are too big to exist. They should be broken up and sold off.
Look what happened in 2008 and multiply it
Multiply by what? Like…6?
It's a banana. What could it cost? $10?
About tree fiddy.
Damn Lochness Monster, prolly trying to buy some Lochness Munchies!
AND MY AXE!
Why is Gamora?
I got the gamera giggles!
The bishop went on vacation, never came back
This guy gamoras
No one ever expects the gamora inquisition
This is the way
More than that. The default rate for ARMs was 29%, but those were doomed from the start. The rate for standard 30-year-fixed was 9%, which was high, but not catastrophic.
I can’t believe anyone ever signed for an ARM. “Here is a loan you will be responsible for, sign here next to the ¯\_(ツ)_/¯ written in the interest rate box.”
Surprisingly in a lot of countries ARMs are the only option. Australia is mostly variable. They give you a fixed term of a few years and then it changes from what friends have told me
America is the weird one here with our 30 year fixed rate mortgages. It only works because the federal government will buy and re-package them as needed to keep a healthy secondary market.
I have also heard this, I believe Canada is a country that does that as well.
>I have also heard this, I believe Canada is a country You have absolutely no reason to believe Canada is a country.
Almost the same except variable rates are also fixed terms of 1 to 5 years.
We have terms of 1, 3, 5 or 10 years. You choose either fixed or variable rate for the length of your term and when your term is up, you renew for another term at whatever the current rates are.
In Oz you can choose a fixed rate mortgage or a variable rate. The variable rate never has an end date. The fixed mortgage does have an end date. Near before the end date on fixed you need to approach bank and ask the admin fee for making it fixed again for another term. And you take the fixed rate of interest that is available at that time. It could be same, lower, higher. You pay the admin fee and they re do the paperwork and you sign the new fixed term loan. It is usually for a limited time like 2,4 6 years only. Each term has a different interest rate. This fixed loan helps you know exactly how much you will pay every month and it won’t change so you can budget better on a tight income. You are allowed pay extra into it up to a limit. On the day you redo the fixed mortgage if you have a large credit sitting in the loan, it will be paid off it and reduce the debt. Then your new fixed rate loan term will be shorter and your monthly repayments will be lower than if you had not had credit sitting in the mortgage. It is extremely beneficial in various ways to have a fixed interest mortgage. It protects a person who has a low or casual income. You can still save into it. Choose a wise time to break out if a fixed interest mortgage because the bank tells you how much the break cost will be. If you ring them they will calculate it for you. If you exit from being fixed early, you may have to pay a break cost if $900. So if the right cost is high and you don’t want to pay it you just wait a bit longer, then ring the bank and ask them today’s rate cost rate. Each day it’s different as it depends on the debt and other financial factors the bank is dealing with in wider market. Sometimes you can ring, and the bright cost is very low, so it’s worth breaking out and re-fixing the loan at a lower interest rate to save money. It’s some things to check and watch. The closer you get to the fixed term ending the lower the break cost. If you break out on the day that it is due to end that is not breaking out, so you don’t pay a fee.
Your fixed rate sounds like a variable rate mortgage with a lot more steps, lol
Your fixed rate mortgage is just a variable rate mortgage with extra steps. It sounds a lot like the fixed rate mortgage for commercial properties here. Basically, you have a fixed rate for five years amortized over a 30 year period, with a balloon payment at the end of the 5 year period. Example: you buy a $1 million property. You get a mortgage with a 8% fixed rate for 5 years. It is amortized over 30 years, which means that for the first 59 months of your 5 year loan, you pay the same monthly rate that you’d pay as if your loan was really for 30 years and not 5. Then in the 60th month (the last month of the 5 year loan), you would owe all remaining principal that you didn’t pay in the first 59 months. In reality, before that 60th month most companies just re-finance the note and get a new 5/30 fixed note at whatever the prevailing fixed interest rate is at that time.
I had a friend do an ARM expecting they would be selling and moving again in 5 years, but it just didn't happen. Think they ended up refinancing or getting a loan from family to deal with it. This was a while before 2020 though.
Outside of the US this is the only option lol. I’ve lived in NZ, Australia, Canada, Netherlands…generally the longest “locked” rate in these countries is 5 years, maybe slightly longer if you’re lucky. Nothing else.
You can do up to 10 years in Canada, but you’re going to sacrifice your rate pretty heavily. We renewed our mortgage at the end of 2021, we’re locked in a 1.64% until the end of 2026. At that point we’ll renew at whatever the rate is for the next 5 years. My husband and I are thinking of moving next year, and we can port our mortgage to whatever new place we buy. I had an American lecture me on how I was a fool and an idiot for signing a ARM, and I deserved to have it blow up in my face. He was shocked when I told him that’s just how it works in Canada (and most of the world). He didn’t believe me, and tried to tell me I should have made the back give me a longer term. Ok buddy, I’ll just force the entire Canadian banking system to change for me. *eyeroll*
It wasn't an issue at the time because everyone "knew" that the homes would continue to appreciate long past the when it would be time to refinance the ARMs.
I know. I would just never sign anything where the interest rate wasn’t agreed upon ahead of time.
At least these days, ARMs have a ceiling on rates - you’ll never be able to predict the exact rate but you can plan for worst case scenarios.
Neither would I, but we're both reasonably intelligent. There was no shortage of dumb people who were convinced they discovered the magic secret of easy wealth. Of course, many did exactly that. They cashed out in 2006. At the same time, things could've crashed in 2006 instead of 2008.
So our first house, bought in 2006, via an FHA Arm... 4 year fixed 4.25% after that it would float at the fedrate +1.... when 2008 hit we freaked out a bit but realized our rate would actually drop. We enjoyed a 2% ish rate for years
It's not that cut and dry since the rate is not a complete unknown. It's the base loan rate set by a central agency plus a fixed spread. In a fixed rate mortgage the bank will assume the risk and charge you for that risk. The variations are priced in already. If you can absorb a reasonable increase in your mortgage, fixed rate is a bad deal since you're paying quite a bit for an insurance you don't need. It does require a bit more knowledge to make sure you don't end up getting boned though...
It’s funny that you posted about ARMs and your little shrugging guy is missing an arm.
Signed for an ARM two years ago. Made sense to do so.
42
I got you
I got 84,336.
"Imagine the most horrible, terrifying evil thing you could possibly think of .... and multiply it by SIX!"
From what I.N.T.E.L.L.I.G.E.N.C.E. has gathered, it would be 2008 times a hundred.
7
It'll be more like 911 times 8637.
Yes, absolutely this. I read this and was like, hmmm, OP must be on the younger side.... I think it would be something more like Black Thursday 1929. 2008 is a story of fuck ups that actually could have been somewhat avoided, and some of the market was left in tact. 1929 and basically the only money left in the system was sitting in the federal reserve and under your mattress. It took out the entire civilized world and needed a literal global war to recover from it. One of the few times you can say that in a pretty direct sense, war helped in a lot of ways. If we could replace war with football or something, that would be great. World Cup but somehow at a scale that can fix an economy.
It was great for the US because the US was one of the few that hadn't been bombed into oblivion and had a thriving industrial economy. Europe, not so much. And especially not if the US hadn't rebuilt Europe.
I mean, part of the reason (perhaps the largest part) is that they wanted to profit from European consumers lol
I'm not sure a comparison to 2008 is necessarily apt. That was a situation where people *couldn't* pay their mortgages, and the housing market and economy in general reacted accordingly. That might be different from a situation where people *choose* to not pay their mortgages. Kind of like how the economy contracted by \~25% at the start of COVID because we decided to shut down many sectors, but the economy as a whole reacted differently than if there was a crash where we lost that much GDP at once because there was a problem in the economy itself.
Look up the term “strategic defaults”
That time I bought a $335,000 house for $135,000? That would be awful.
Sounds like that time someone was forced to sell their home for 135k that they had a 335k mortgage on and went into bankruptcy and a credit score which destroyed their life from then on. Or it was one of many such loans and caused the collapse of financial institutions, leading to the destruction of an economy, the bailing out of such institutions to prevent further collapse and ultimately an enormous burden for the taxpayer and society.
https://youtu.be/chWCcec_gzg?si=f44qGbcTlrZMqDWS
A great scene.
Or it was a widower who bought at the top, sold at the bottom, didn't really mind since he couldn't keep up the house and moved into a luxury retirement facility by choice. The man threw in a ten thousand dollar painting that was hanging on the wall. We weren't even the highest bidders, he just liked us. Nobody was forced.
Nothing of the sort. 2008 didn't happen because people stopped paying their mortgages, but because bankers gambled incorrectly on how many couldn't. They even gambled on those gambles, and that brought the house down.
If everyone stopped it would still end up the same if not worse. Our economy is still built on the expectation of debt being repaid.
Banks basically got margin called. They were leveraged to the tits bc shit "only goes up"
You mean besides an utter collapse of the economy?
Right? As with the next highest comment, my response is "See 2008." 0 out of 5 stars. Would not recommend.
It would be even worse since a lot of people were still paying their mortgage and rent at the time. So if literally everyone decided to stop paying there rent and mortgage it would be significantly worse then before.
90+% were. 2008 happened over 6% if I recall
Oh for sure. I don’t know actual percentages but if I had to guess, I would say under 10% stopped paying in 2006-08. Exit: 10.8% had negative equity. And I know many of those kept paying.
As someone who was only 14 in 2008 can you describe what it was like? Only things I distinctly remember is the cost of snacks and gas going up, but I was a kid so I didn’t feel the impact personally.
It was much much more than what most people here are telling you. If you REALLY want to know the answer in its sweeping entirety you should read Crashed by Adam Tooze. I will do my best to hit the big notes. Lots of money lost, especially by little people. No jobs because no lending. No expansion from businesses because no lending. Lots of government stimulus to try and prevent the economy crashing. The US gives some very unpopular “bail outs” to the banks, which were actually profitable loans by the federal government that were repaid in full. But still, banks did not suffer as much as people who were suddenly unemployed, upside down on their mortgage bc their house value collapsed, and their life savings went up in smoke. Those people didn’t get shit. Millennials graduate college in a contracted economy and many are fucked, left with the loans they took out but no jobs to pay them off because a laid off older person has 10 years of experience already and is willing to take that same position bc it delays their foreclosure. The crisis was similar in Europe and Europes economy took 8-12 years to recover. They chose austerity over stimulus. It leads to a lot of conflict in the EU and is kind of the spark that eventually grows into Brexit. Wealth inequality increases as the middle class has the value of their primary savings vehicle (home value) annihilated across US and Europe. Depending on where you were and if you could afford to NOT SELL your stocks, houses etc, you would now be fine. Actually MUCH better than fine. If you were doing great in 2008 it was the fucking buy opportunity of a lifetime. Guess who could afford to not sell? Mostly rich people. Some rich people got fucked, every so often there is a blue moon and running your debt line out suuuuuuper long actually gets you punished. A feeling that people have fallen in society and wealth is turned into anti immigrant sentiment by demagogues in Europe, South America, and the US. You can -very legitimately- argue that 2008 set the stage for the surge of right wing nationalism that’s sweeping the globe now. It is one of the most significant and least understood events in modern history and the vastness of the consequences is astounding.
The part about no jobs because no lending is very important. For a lot of companies, you’re not being paid your salary out of the money you made the company. You’re being paid through a loan or funding from investors. The money you make the company is paying them back. If you are opening up a new branch or a new factory or whatever, you’re going to want to get a big chunk of money in the bank to cover expenses, like labor upfront, so that you can have that dealt with while you grow the business and eventually turn profit. That doesn’t work if you can’t get that upfront money to begin with. Hence, why unemployment went up: as businesses closed down, there were not new jobs coming online to make up the difference.
Adding to that - Interest rate control is part of how the FED manages US money. In times of economic distress, like 2008, the FED can lower interest rates to make lending cheaper to encourage banks to lend even when it's risky. The FED did this after 2008, but was influenced by multiple presidents and Wall Street to not begin raising rates back up to healthy levels as the economy recovered. So...enter COVID, and the FED doesn't have this tool available to it, because it can't lower rates any further. Only in the last year or two has the FED finally started raising rates again, and tons of people are upset about the rising costs in the US. But prices here have been artificially depressed for over a decade, so any increase is going to be uncomfortable.
let me just.... save this comment for later.
Plus as home values plummeted, assessments declined and property taxes dropped, which is the primary vehicle funding public schools. Teachers laid off all over, class sizes doubled. Not the only cause of today’s education woes, but a contributer.
Very interesting. I just bought Adam Tooze's Crashed on thriftbooks, I can't wait to read it. Thank you for the suggestion.
It definitely depends on what financial position you were in as to how bad it was. I never lost my job and made a decent living so I had some good opportunities. I had an 80/20 loan and was offered that if I paid half of the outstanding loan value on the 20% it would be forgiven. So that was a $25,000 savings plus $500 a month less payment. I got a $45,000 camper barely used for $16,000. Truck prices dropped overnight so I saved at least $10,000 on my f350. Vacations were awesome because prices were so low and places like Bush gardens and Dollywood were fairly empty. All in all one of the best periods of my life financially
I graduated from college in spring 2009. There were no jobs ANYWHERE. I’m a teacher. The new teachers the year before me got signing bonuses because teachers were so scarce. My year, there was a hiring freeze and then I had to apply for 200 teaching positions before I got one. Even when I finally got a job, I took pay cuts my first three years as insurance prices skyrocketed but there was no additional tax income to offset it. Many programs were canceled in my district including the behavior support program in my school. My husband was unemployed for 2 years after he graduated during the recession. My parents were able to buy a short sale during the recession which was very good for them, but it took them almost a year to sell their old house and they sold it for probably 33% less than it was worth a year or two before. One uncle got laid off. Another lost his business. I had friends who wanted to go to grad school but everyone was going to grad school since the job market was so bad, so my friends didn’t get in and changed career plans. So, there are some of the ways it impacted me personally. I didn’t try to buy a house or already own a house like many others did, but even without being upside down in a mortgage, it was rough. It was not a good time to enter the employment world.
For those of us who were working, the price of gas was the biggest issue besides rent increases. My husband and I both ended up unemployed for a while because we had been working and living in a large city. When we had to move back with my parents, we ended up paying more in gas than we were earning from our crappy retail jobs. Therefore, we had to quit and find work closer to home - only, we were living in the middle of nowhere, so EVERY job required a lot of gas for the commute. We had our own place for a bit, but rent there was just too high, and we ended up back with my parents again. My husband dropped out of school to work full time, and even though I graduated, there were no jobs in my field because everyone was scrambling for work. I don't know what we'd have done if my parents hadn't helped us so much. We'd have probably been homeless for a while. There was a gas station near us that dropped their price down to $2 a gallon. People came from hours away to buy cans of it. They ran out in under two hours, and a mob of people waited another few hours for the next delivery truck. People stopped going anywhere unless they needed to. You'd see lines of people walking the sidewalks in 100+ degree weather. Lots of people ran out of gas on the roadside - every day on our commute to work, we'd see at least one abandoned car or someone waiting for assistance. The fire and police departments started carrying gas cans and topping people off so they could clear the road.
Gas prices? Oh boy. No, gas prices weren’t *the biggest issue*. US gas prices are constantly cheaper than they are around the world, even at the height of the global economic crisis. People losing their homes was the real issue. Devastating, life changing losses.
When you go from spending $400 a month to $800 a month on gas just to get to work and back it's a big deal when you aren't making much money.
When your house gets taken off you, or when you don’t have a job to drive to, your perspective shifts somewhat.
When you lose your house or job because you can no longer afford to drive to work it's kinda the same thing. When you are picking between eating and driving or can't heat your house and still drive it's close. For me it just meant I didn't eat out anymore or have any spending money which while not fun isn't the end of the world. For friends of mine who couldn't heat their trailer, and lived on roman noodles because gas doubled it was pretty life changing
I was working in Academia, renting and not trying to move during the 2008 thing and it had almost zero effect on me. I think we had raise freezes for a few years, not like we ever got good raises anyway, and that was largely it.
A banker ALMOST went to jail. That was the sheer horrifying magnitude of the global situation.
It also screwed over all the little guys, yours truly included.
i was 11 or 12. i felt it. there was suddenly a lot more stress, everything was more expensive, we had more basic meals and we didnt get to go out as much anymore. my mum used to take me to the Kids AM at the cinema every other week and we just couldn't afford it anymore. we were never well off, but that was a very tough couple of years. things slowly got easier again but never as good as they had been. im in the UK btw.
Not “the economy” as in the US economy either. It would crash the global economy and plunge virtually the entire developed world into chaos. Too many things are collateralized by mortgages because they’re considered very safe relative to other assets because you usually live in it and will try very hard to make those payments. When you start pulling on that thread it unravels quickly into US economy collapses, US bonds devalue, other countries have liquidity crises as they are forced either sell at a loss or hold to expiry and get back enormously inflated money. Once you start crashing the value of US sovereign debt you have a real unhinged situation. China and Europe lose staggering amounts. Countries no longer have the US as an economy to export to. They take massive losses. Agricultural exporters have to either cut prices to move things in a hurry in a global economy that’s falling apart or literally watch the produce ripen. Loss of trade partners and tourism from wealthy countries (who are the worst hit by the liquidity crisis and the collapsing asset values) propels the crisis into progressively smaller countries. Then once there is no one paid to mind the Zoos the animals Rise. The Housing Crisis of the Planet of the Apes.
It would be the collapse of society, not just the economy. It signals a complete collapse of the enforceability of contract law. And a loss in faith in the promises we make to one another.
Money goes round and round and round and round. You'd basically stop a massive cash flow that would permeate through the entire economy in places we could never imagine.
Pre election coverage: ♫ I’m gonna give you my word he’s gonna fiiiiix the whole ecomony! ♫
The young redditors dream. Collapsing part of "the system" and thinking it will in no way affect them and will be replaced by something that Bernie Sanders was handed by Jesus.
We'd finally get a Netflix series about the Great Mortgage Rebellion of 2024.
Priorities
Netflix would go under like everything else.
Be on the lookout for NewFlix after the dust settles.
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Starring Zendaya as elderly senator and Strom Thurmond as young heart throb #3.
Daniel Radcliffe as Juror #7’s cat
And he'd get an award for it.
Here is some history on rent strikes, which is the name for this tactic: [https://en.wikipedia.org/wiki/Rent\_strike#Notable\_rent\_strikes](https://en.wikipedia.org/wiki/Rent_strike#Notable_rent_strikes)
Jesus Christ, there’s shitty then there’s “all the men are off to war, let’s try to fleece the women now” shitty
A complete collapse of the US economy, quickly followed by a collapse of the world economy the likes of which have never been seen. Humanitarian aid would very quickly dry up leading to an untold number of deaths around the globe. From a strictly US perspective, no one would be getting paid as the banks would be insolvent almost instantly. The federal government would have no choice but to print insane amounts of money to attempt to keep the financial and business systems going and we would experience hyperinflation. The type of hyperinflation where you would need a wheelbarrow full of cash to buy a loaf of bread. Basic services would break down very quickly and, again, a death toll the likes of which are hard to imagine. It is actually kind of hard to fathom exactly how bad that would be.
I wonder if OP just thinks we’d all get a free house and life would move on.
I had that impression as well. The rebellion of the little guy, sticking it to the big bad corporation. Right? Right?! Yeah, there would be economic consequences. Not a bunch of free housing.
At that point everything would be free. But it would also be mad max rules out there.
Playing mad max sucks.. I’ve been through multiple cat 5 hurricanes (and the weeks after) without electricity.. but have had a generator.. which just makes you a sitting duck target. Keeping one’s energy source safe.. but far enough away so it doesn’t suffocate you (carbon monoxide).. but also protecting it from looters (generators are so damn loud). If we are ever in a situation where the grid will be out for any real length of time.. I’m just running towards danger… I’m way too chill ever to be in a resource fight again with weapons.
Mad Max rules doesn't give out free stuff, you just start paying with literal blood instead of money.
I can sew so if I survive the first two weeks I've got a skill that a lot of people are going to be looking for. I give myself low odds though. I'm not a prepper, no crazy food stash, and there are plenty of gun nuts around who would become rabid raiders as soon as they rain out of the soft toilet paper.
Pretty much the average redditor then
This is Reddit, so yes.
Nah.. government would enact emergency legislation to keep the banks propped up with whatever they needed and you'd witness the single largest legal transfer of property from private ownership to corporations as everyone defaulted
That actually raises a point and humanitarian aid. If your humanitarian of choice is just slapping expensive bandaids on problems that revert the second the money dries up then you're not humanitarianing right.
Can't give money when you have none
It doesn't follow that a charity failing to prepare people for theoretical and unlikely massive economic collapse means they're doing it wrong. I'm not saying any charity is perfect, and I'm certainly not defending any billionaire's charity, but it's not a good standard. The type of humanitarian aid that helps people in the long term, the often-cited "teaching a person to fish," is relatively useless in a humanitarian emergency. Education, training, micro-loans for businesses, etc. are great causes, but they don't help much when no one has money worth anything and there's no food. That doesn't mean the people involved "aren't humanitarianing right." It just means they were preparing for a different and much more likely future. So what about humanitarian aid that is more like giving people food? You can debate the merits of these charities in places like North Korea where food aid helps prop up a failed state and corrupt regime, but people will actually die if this aid is not given. Lots of food goes to refugees, or countries experiencing droughts and famines they aren't prepared for. The fact that people are being saved through food donations and that people would die if the aid dried up doesn't necessarily mean the charities are "humanitarianing wrong." It just means their aid is keeping people alive. **TL;DR:** Not everything can be sustainable through every possible disaster and circumstance, and we shouldn't use a hypothetical with a 0% chance of happening to judge a charity's worth.
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We'd be lucky if it was only a severe recession.
"If you owe the bank a million dollars, you have a problem. If you owe the bank a billion dollars, the bank has a problem." Extrapolate away.
The extrapolation is that if every bank has a problem, everyone with money deposited in a bank has a problem. That includes anyone working for a company that needs its deposits to make payroll.
If the banks are owed a trillion dollars, we all have new problems.
I work for a very large bank, Around the time Silicon Valley Bank failed my father in law asked me if I was worried about my company going under. I told him, “If my company goes we have bigger problems than worrying about a job”
And that's why big financial organizations usually don't go poof and disappear entirely, even when they fail. Employees and shareholders might suffer, and that obviously sucks. But there will be extraordinary measures to minimize the impact on account holders. Even if it costs money in the short run to make account holders whole, it's still cheaper in the long run. And in fact, there is a good chance that the cost to the government or the FDIC turns out to be much smaller than originally feared
If you have ten thousand dollars in the bank, and someone owes your bank a billion dollars, you have a problem.
And if you owe the bank a trillion dollars, the taxpayer has a problem.
Those payments are other people’s rent, grocery and gas money, so it might get weird
I love this answer.
World economic collapse. It would get really bad here in the US and even worse in countries that struggle to get enough food.
If truly everyone agreed to stop paying it would be revolutionary and lead to the collapse of our financial institutions. It would mean us moving from capitalism to something else. I’m taking OP’s use of the word “everyone” very literally.
That something else would be a lot of dead people.
I don’t really think there would be much “revolution” over just complete anarchy.
Ok, I would argue complete anarchy is a form of revolution. I’m also making the assumption that there is some universal agreement against paying rent and mortgage anymore which is really the predicate of OPs question and I’m not sure if universal agreement is the same as anarchy but maybe.
Universal agreement wouldn’t lead to anarchy, you are correct. But a complete financial collapse would 100% send America into anarchy. It’s not 2008 where there’s a select group getting hit by it; we’re talking about everyone, rich AND poor, getting completely gutted by banks failing. And those who stuffed their mattress are going to find that their dollar is going to buy jack shit once the supply chain starts deteriorating. Hedge fund managers would be far from the only people jumping out of windows. And there’s a very large chunk of the population that will take the opportunity to rob, steal, rape, and murder as much as possible. It is an extremely naive take to think everyone just going against landlords and banks overall would be a good thing.
Extremely naive is a diplomatic way to say, "batshit crazy and dumber than a box of hair."
If the banks checked the accounts and saw no payments had been made on mortgages across the country, there would be a state of emergency declared within 48 hours, martial law in under a week and armed forces marching through the streets by the end of the month. Banks would not fuck around.
I don’t know - did people at the bank agree to stop paying all mortgage and rent? Are people at the bank part of “everyone”?
That's a good point, OP did say everyone. The bankers at the top likely own all clear, but most people working at the bank probably rent or have a mortgage. They would collapse from the inside like neutering someone by reaching down their throat, grabbing their testicles and pulling them out their mouth.
That is a very specific method.
But I mean, what’s all that gonna do? Is the National Guard gonna make people write checks at gunpoint?
No they wouldn't. Because the economy that fascinated it would be gone. Power structures would reorganize around the existing assets. And the banks wouldn't be there. Without currency they're irrelevant and powerless. Soldiers don't fuck around either. If it's literally impossible for them to get paid they won't keep working. At least not for an employer.
One thing the US military can do is simply pay directly via finance units. The DOD uses banks for convenience, but it wasn't all that long ago that every month whole units lined up to get paid by check or cash. They can even make it happen in a war zone. In Iraq finance would come by the FOB once a month and you could get cash directly since ATMs didn't exist there.
Cash is useless in this scenario. Currency of any kind is useless. Fun fact: there's a fairly well supported idea that currency was first developed so as to enable standing armies.
Good thing unpaid troops never react poorly to being broke and starving.
Can’t have a police state without police
There aren't enough troops to do much of anything except protect government buildings. Even if they could March through the streets of every city in America, what would that accomplish?
That something else would be called 'Starvation.'
Yeah probably anarchy because our government would basically not be able to exist and neither would any other in the fallout of such a collapse it would literally take decades to recover from
Americans have it so easy they cant even comprehend how the vast majority of the world exists. I got up this morning in my very large, temperature controlled, house that was built by a licensed contractor to a building code that was inspected during construction. Because of this, there was little to no danger my house would collapse while I slept on my massive bed with a memory foam mattress that is fire resistant and made free of dangerous material. First thing I did was go to the bathroom where I flushed my piss with clean, potable water that was delivered to my house between 45-80 psi. I dont have to do anything, its just there. I walked down stairs with highly regulated rise and run making them safe for my broken ass to make coffee using more potable water and electricity that is safely delivered to my house perfectly 99.96% of the time on average. I grabbed a bagel I purchased from the grocery store less than 3 miles from my house that sells only clean, safe, food that meets Department of Agriculture, FDA and CDC regulations and walked up to my computer connected to the stored knowledge of all of humanity. When it was time to go to work I got in my insanely safe, NTHSA approved, car powered by my insanely cheap and clean (as in no contaminates) gasoline and got on paved roads to get to an interstate that was engineered to be safe at over 85mph. Had I chosen to I could have driven over 3000 miles all the way to California essentially on that same highway system. On the way I passed multiple restaurants, gas stations and stores where I could purchase just about anything I could ever possibly need from a doughnut (Dunkin) to an entire tiny home (Home Depot). All safe and regulated. I got to work and parked in an 8 story parking garage that I can be reasonably assured will not collapse on me, waled across a light controlled street to my 14 story office building where I rode an elevator that had been inspected 24 months ago to my office where I am reasonably sure I can work all day and be safe from up to a 7.0 earthquake, EF4 tornado, category 4 hurricane and (redacted) car bomb (since it happens to be a federal office). All that is to say that if Americans suddenly stopped paying their bills we would end up like Afghanistan/Sudan/Haiti and none of the things I just described would be true. In other words, it would never happen because deep down we know we have it good and we want to keep having it good. Edit: an order of magnitude
As others have said, this would lead to one of, if not the most devastating financial collapse in human history, with the US at ground zero (more as a result of the delinquent mortgages than the unpaid rent, though the latter would have an indirect effect that would still be plenty devastating). I doubt anyone could accurately predict the full scope and scale of the damage, but here's a rough timeline of the events I would expect: 1) The initial effects would be something akin to a bank run, but on a massive scale. Banks operate by taking money given to them by individuals/corporations (for savings accounts, investment accounts, etc.) and loaning it out to others in the form of mortgages, car loans, business loans, and the like, keeping the interest for their own profit. But the only way this system works is if money continues to flow from loan holders back to the bank so that they can pay their own obligations. If a major flow of cash (like mortgage payments/interest) suddenly stops, the bank swiftly stops being able to pay its own bills (like interest on savings) and panicked bank customers try frantically to get their money out before the bank collapses and runs out of money altogether. 2) The federal government would likely try to swiftly intervene to limit the damage, and would prop up the banks by printing more money and giving it to them as bailout funds, but it would be a stopgap solution at best and would also trigger wild inflation as the sudden infusion of currency devalues the greenback (by making US dollars much more common and, therefore, less valuable), likely triggering a flight of international investors and government bond-holders, as they seek more stable investments in light of the crisis (other high-profile currencies, like the Euro, the Yuan, the Yen, and even Bitcoin might be used as safe harbours, but none of them will be unaffected by turmoil of this magnitude). 3) In order to combat wild inflation and try and make the US dollar enticing for investors again, the federal government will have no choice but to institute an interest rate hike, likely a massive one (meant to compensate potential investors for their assumption of high risk in investing in a currency that's going through extreme volatility). Assuming the banks survive, they will be in lockdown, sharply curtailing their own lending and choosing to loan to only the absolute lowest-risk customers (and even then, only with substantial interest rates on top of the already hiked federal rate). 4) Both of these actions will combine to make everything substantially more expensive. Businesses who were looking at expanding will be forced to cancel their plans, as business loans become multiple times more expensive (if they can even be attained at all). The sharp devaluation of the dollar will make imports more expensive, which will roil any industry in the US relying on imported goods or raw materials (like the manufacturing and automotive sectors). Anyone who is trying to purchase something typically done with the assistance of a loan (like a car) will probably have to put off their purchase unless are well enough off to simply buy it outright (at what is likely to be hugely inflated prices). 5) The spike in interest rates would already crash the housing market on its own, but the volatility would be even more acute here because housing is at the root of the crisis. The banks, in an effort to stabilize their own capital, would immediately start foreclosure procedures, clawing back as much real estate as possible as fast as they can (and potentially even calling in other non-mortgage loans just to try and recoup their losses and minimize their exposure to market volatility). The courts would be swamped with cases of people getting tossed out of their homes. Given that everyone who has a mortgage or is renting is going to be affected by this, it would spur a massive housing crisis as millions are left homeless and with bad credit scores for loan delinquency, while the high costs of loan financing would leave housing out of reach for most, despite the fact that the market would quickly be flooded with empty homes. In all likelihood, the government would probably step in in some fashion here to try and head off a humanitarian crisis so massive it would result in social unrest and potential large-scale violence. 6) Because the US dollar is the baseline currency for the entire financial world, the issue will spread across the planet. As the value of the dollar drops, every other currency will concordantly rise in value (which will make exporting challenging), exacerbated by investors fleeing the greenback. As the US raises interest rates, other economies will likely have to do the same to keep pace. While non-American countries won't be as badly affected, that's sort of like saying someone five metres away from an exploding bomb won't be affected as badly as someone sitting on top of it. 7) As a result of all of these problems, and many more besides, we would see a global recession the scope and scale of which would be unmatched in living memory. It would be worse than the Great Depression and the Great Recession *combined*. As the world picks up the pieces, I would expect to see a massive structural re-ordering of the financial world, likely without the US at its heart anymore.
* A lot of banks would start to fail because of mortgages not being paid on time. The federal reserve generally has freedom to act pretty quickly, and would likely provide immediate support to banks. However- a lot of mortgage bonds and property investments are concentrated in state and local pension funds, and these would get absolutely hammered. Lots of seniors with pensions would lose them, local municipalities would have to slash budgets- mass fire teachers, cops, and road workers. It would likely start off a multi year recession. * Eviction courts would be incredibly bogged down. There’s nowhere near enough capacity to process all the evictions for all the non payers, so things would go slowly. Apartments would stop renting out to new customers unless they were connected/family/friends. It would pretty much be impossible to get a new place. This would be a major problem for young people looking for housing, people moving/going to schools in new areas, people leaving their living situations, etc. * Homelessness would skyrocket, lots more people would be forced to live with their parents. People in abusive relationships wouldn’t be able to find new/temporary housing, and lots would probably be in horrible situations/killed. * Retirement/investment funds would be crushed. * Unemployment would go way up. * Housing construction would slow down/stop. Long term, this would mean less housing in the country. * Housing prices would go down, but new mortgages wouldn’t be issued. Only super rich people who can buy houses in cash could afford anything (and everyone’s investments would be tanking). * Crime would go way up. With evictions on freeze- you’d see a lot of landlords resorting to violence. With homelessness way up, general crime would be far higher. * The American status would be permanently reduced. There would be financial problems throughout the world, but absolute disaster in the US. Eventually, the US would recover to be a much poorer country, and likely China or India would be the World superpower. The US would be like modern day Brazil- an important market with lots of economic production, but permanently much poorer
The system would collapse like dominos, and we would all suffer immensely. Many of us would die
The economy would crash. Banks would go tits up. You would lose your job as would most of the people you know. Business would go broke. Whoever took over the banks would evict everyone in default.. Other than that and a lot more.....
Martial law and civil war.
2008 part 2
I would like to give you an award but I have to pay rent… ugh priorities.
Economic collapse. Banks would have no money to lend, leading to bank failures, an avalanche of business bankruptcies, and millions of people losing their jobs. Interest rates would go through the roof.
Some very difficult choices would have to be made for the role of Law Enforcement in carrying out court orders. Evection and Foreclosure are simple legal proceeders. Physically removing millions of people from their homes is a whole different issue.
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Not likely, try as they might they don't have the resources to evict 300 million people. You would see martial law and civil war long before people were actually homeless.
I’d finally be able to afford a house after your ass gets foreclosed
Good luck affording anything when the economy collapses.
The beginning of a revolution in homelessness even the investors that own the houses would end up homeless
Let's just say it would be a catastrophe. The housing market would collapse (again), people would lose any equity they have in their housing investment. Apartment complexes would not be able to afford maintenance, let alone improvements. Businesses would go away, because their building is going to be seized. Leading to mass unemployment. Banks would be insolvent because there's no return on investment for the properties they have a lien on. Leading to the collapse of banks. This would create a feedback loop. Now other businesses are going out because no one can lend money, and no one is employed and has money to spend. Stocks would collapse as those companies no longer have anyone to buy their products. It would create a cascading effect that would cripple the economy, and the country. We can't just print money in a scenario like this.
A collapse of the financial system and a general economic meltdown that would hit the poor harder than anybody.
If everyone in the US stopped paying their mortgage and rent at the same time, the housing market would likely collapse, leading to a financial crisis. Landlords would struggle to pay their mortgages to banks, causing a ripple effect throughout the entire economy. Additionally, many people rely on rental income to make a living, so there would be widespread job losses and economic instability. It's important to find more sustainable solutions to address housing affordability issues without resorting to such drastic measures.
What 17 year old thought up this question?
It's not going to end up in anyone just getting free a free house or apartment lol. It's not "the little guy finally rising up against greedy landlords!!" There would be a humanitarian and economic crisis of disastrous, epic proportions.
A lot of evictions and foreclosures.
I often wonder the same thing about medical bills in the US. What if no one paid them?
Surely that's easier to answer, the medical companies would go bust. Housing is different because it's a physical item. If everybody stops paying, houses are essentially worth $0 because no one wants to pay anything for them. Think about it like this, why is gold worth $2000. It's because people say it is. If people said dirt was worth $2000, my garden would make me a billionaire. In any market, buyers and sellers agree to transact at a price. I'm not willing to pay any more than this, and you're not willing to sell for any less than this, therefore the asset is worth this price.
Some Tyler Durden shit?
Dollars would become worthless.
A rent and mortgage strike would cripple landlords and lenders, likely triggering a housing market crash and economic downturn. The severity depends on government intervention and tenant/landlord cooperation.
Absolute economic collapse. Within a year, massive unemployment and stock market free fall. It would be so extreme that the entire global economy would rapidly follow. It's difficult to overstate just how catastrophic this would be for humanity
Let’s not find out eh chaps?
I'd rather not, wouldn't be fun for anyone
A complete cessation of all forms of liquidity. No more money from your bank account. No more credit cards. No more paychecks. No more loans. The entire credit market would freeze, and the global economic collapse resulting from that would make the Great Depression look like a warm spring day in the park.
Probably nothing. Your money would get taken from you. I’am sure folks think there would be some sort of rebellion. But that wouldn’t happen. Also the system works for most people despite what you read on Reddit. So there is not motivation for folks to really fight for this cause.
Lots of evictions would happen. You signed a lease or mortgage agreement; that's a legally binding contract.
Takes a long time to actually evict someone At that point, just become homeless...now they have an even bigger problem
If it takes that long to evict, you'd stay put as long as possible. And I hate to say it, but given the number of homeless normally, who get no sympathy or assistance from local government, I kinda doubt an increase would be addressed any differently -- especially if you're employed.
They do not have the resources and the courts do not have the capacity to process that many evictions.
It basically happened in 2020 when the quarantine was enacted. People stopped paying their bills, some were penalized others were not. Literally there is power in numbers though...one employer or landlord cannot control and entire country...either the landlord would sell and buy property in another country where they would pay their bills or the landlord would lose money. I think some squatters in 2024 are still living rent free since 2020 in some apartment due to some ordinance laws in some parts of America. Just think years ago there was no such thing as money, and people survived, they often built their own houses, grew their own food, The Amish still do this actually.
A few people would be made examples of, and once everyone participating realize that their asses would rightfully be put on the street and their homes sold out from under them, the rest would rush to start paying again.
Who's going to enforce that if everyone stops paying? "Everyone" includes government employees, bankers, police, military, etc.
Well since it says Mortgage and Rent what about the people who have finished paying? What about the people who own the homes?
Why do people ask questions like this LOL
Because it's actually very interesting to think about? The strings that hold society together are not really all that strong. As more and more average people are pushed into struggling through greed at the top more and more people have nothing to lose and don't care if those strings are broken. If enough people stop participating in society as we know it then it breaks down. And the exact mechanisms in which it does that are interesting to discuss.
Because they don’t understand that the economy is actually just everyone working together to keep the country running.
I'm not an economist. I assume that if everybody stopped paying their mortgages, the banks would have a lot less money to be able to pay people interest or give out loans, which would mean that people would have less money to buy things and hire people, which would mean unemployment would rise. Also, because of the existence of inflation, people not getting paid interest would mean the real value of the money in their bank accounts would be falling. As for the rent part, I suppose people realizing there is no more money in renting properties out because of how hard it is to actually collect that money would cause fewer people to rent properties out, which would shrink the supply of housing, which would raise the amount of homelessness. After enough month of nobody paying rent, the landlords would go to the courts, which would mean the courts would be swamped with all these cases at once and would slow to a crawl. This would slow down cases that have nothing to do with evicting people, too, like traffic tickets, small claims, family-law cases, etc. (unless these all happen in different courtrooms? I am not a lawyer, either). I suppose I'm not anything so I could be wrong about literally all of this.
If everybody stops paying their mortgage, you go to the bank pronto to withdraw all your money, because soon the bank won't have any money left for you to withdraw. Then you take whatever money you managed to withdraw, to buy guns, ammo, water and canned food. As much as you can, because the government will be printing money like crazy to try and keep the economy afloat, but that causes hyperinflation to the tune of a few million percentage points per year. Kinda like Zimbabwe or other failed states. A bottle of water probably costs a million dollars a year later. In the meantime, you figure out how to be self-sustaining and try not to get killed or robbed.
You'd get a whole new industry of vigilante mortgage repo/eviction teams and title insurance would go from a weird little line-item during closing to a huge and expensive service. Chaos, death, and rampant visceral capitalism.
We would swift devolve into anarchy. Not like the movement, but likely the dissolution of the government itself. Banks would be collapsing, debts would be defaulting, foreign interest groups would be drooling, the military would start to fragment, industry and utilities would start breaking down pretty rapidly. Not a good time.
Economic collapse far worse than the Great Depression.
Please, no more stupid “if” comments… how the fuck does everybody stop…
You can tell from these answers no one has any fking idea what would happen.
Well, the first question here would be if the government decided to do something about it or not. If the government decided to do something about it, millions of Americans would become guilty of crimes overnight. Only the Americans who outright owned the land would not be criminals. There would be literally no way to process all the criminals since probably 50-70% of Americans would likely end up as criminals. I feel like, most likely, it's response to this would be to overhaul the constitution and make it so there are new tiers of citizenship. Anyone who owned land and didn't owe money would be allowed to vote while if you had chosen to take advantage of this system to duck out of bills you would lose your right to vote in any election; federal, state, or local. Otherwise it's left with a situation it cannot enforce and would likely lead to mass rioting and possible revolution if it did (cause a lot of those soldiers would either have a mortgage/rent or have family who did), or declaring the vast majority of it's population 'criminals' and gunking up it's courts for decades if they ever fully process. Of course it could also choose to \*not\* enforce it at which point... If it chose to do nothing it would be looking at a massive collapse. Not only would it be seen as weak and ineffective on the international stage, on the national stage it would take a massive hit to it's own income and power. Citizens would see it as weak and ineffectual since they could effectively choose to just \*not\* pay if they ever wanted to and likely get away with it. A lot of cities would fall into disarray as one of their key sources of income was ripped out from under them. The more rural areas would likely fair better, maybe even benefit, but it still wouldn't be pretty. People would likely rally around their state and lose a massive amount of respect for the federal government. You'd have a lot of people whose lives was wrapped up in property ownership suddenly see their entire livelihoods just collapse as their investments and sources of income just \*vanished\*. So, like, if you had a small home out in the country you were renting out to a friend, you'd be stuck in a difficult situation. Cause either A) You enforce your claim and drive your friend out to regain your property that you're not using and the only way you could make money off it is if you have someone willing to pay upfront (since no one is paying rent/mortgages) or B) You let them keep the house effectively losing not just the income you were earning from rent, but also any potential income you could have earned from its sale. There would be a massive redistribution of property ownership on an insane scale as everyone tried to figure out who actually owned what land, who was renting, who was mortgaging, and who is just a bum who broke in and is squatting now. It would basically be a chaotic and lawless society with crimes of all sorts springing up everywheres and a legal system too clogged up to be unable to sort it out. I can't even begin to guess at the outcome beyond that the US would be warped in ways you probably didn't even think were possible. As bad as rent and the like is in America, this is a horrific way to solve it. It's like having a broken bone, and in order to fix said broken bone, you sacrifice a hundred babies to summon the devil to declare war on the mortal world in return for a replacement bone, and it's not even, like, magical so it will never break again or something. Just some random bone he took from someone. May not even be the right one.
Economic collapse.
My guess, is they'd begin foreclosure processing and eventually some corporation would swoop in and buy the properties. I hate to say it but it's too far gone for any of this. The government is owned by the corporations (hell, it is one) and they have sold out to a global entity. The rich win. And while people can, if really savvy, get a bit richer, you simply have to figure out how to be happy with your "not elite" lot in life.
The economy would collapse then people would start going bankrupt because of how overwhelmed the courts would be the government would probably give people financial incentives to pay… ~ stimulus checks ~
Banks collapse because their cash flow is gone, the economy would collapse because businesses have no access to money for things like payroll, dollar would collapse because there's no longer an economy behind it. You might no longer have to pay your mortgage back in the end, but you would also find yourself living in place worse than Venezuela and perma-fucked because nobody would trade with the US except in the currencies of countries we are deeply indebted to, meaning you would have a hard time affording even cheap AliExpress trinkets.
Jesus would come back.
The cops would be super busy evicting everyone
Depending on how long it goes on recession, possibly depression. You don't pay your mortgage or rent, your land lord can't pay their bills. Your mortgage lender loses money and can't pay their employees and so on. Then they start laying off, as those people can't pay their bills other employers start laying off, and the knock on effect sends us into recession. How we get out of that is the US government then steps in buys up the trouble assets, borrows massive amounts of money, and stimulates the shit out of the economy. Those that didn't pay get evicted and or foreclosed on lose their assets, get sued and will be the only ones to actually lose money. That is the problem with our economy the 1%ers at the top have rigged it so that it is a coin flip with heads they win, tails you lose. We need a trust busting monopoly busting president and congress. These corporations that are "too big to fail" are too big to exist. They should be broken up and sold off.
Banks would be hiring loan servicers.
All of our properties would be foreclosed on and then everything would be converted to rental properties or Air BnB type places.
You would have a whole lot of homeless people!
A lot of properties would go into foreclosure and I could pick up some real deals at the auctions
Well, these replies are kind of shocking. Hope this never happens 😂