David McWilliams: Mortgage debt deal can prevent 'default disease' from spreading
BY far the most important statistic to come out in Ireland in the past few days is yet more evidence of the relentless rise in the number of people falling into mortgage arrears. Since 2006, this column has been arguing that the inverse of a house price bubble is a debt bubble and, as night follows day, when the house price bubble bursts, so too will the debt bubble.
The biggest myth of the boom was that house prices always go up. The second biggest myth was the soft landing in prices. The biggest myth of the bust is that the debt is sustainable. The second biggest myth is that there will be a soft landing in debt defaults. The soft landing in defaults suggests that defaults will be limited to very exposed borrowers.
In the same way as wishful thinking in the boom was nonsense; wishful thinking in the bust is similarly misplaced.