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After reading some of the posts here, you guys seem to indicate this isn't a big issue. Does that sound right?

It also seems you guys are focusing on one facet of this.

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I think it is a very big deal. However sub prime is only the first domino falling over, it then hit the increased credit cost domino and when that falls over it will hit many dominoes and it is then that the man in the street will be more obviously impacted.

I was trying to point out to Dcf that the very thing that caused sub prime in the first place is the very thing that created the "strong" economy that is supposed to help with its soft landing e.g. easy cheap money. How long is the economy going to remain "strong" without the life support of soft money.

In Britain we have record personal debt which is about 164% of income and is greater than GDP at over 1 trillion sterling+. Therefore increasing the cost of money is obviously going to hurt alot of people, its just not going to happen over night. I dont think it will be to long before we see the fall out however.

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That's basically it. The other thing about residential real estate is that people's net worth has been enhanced by increasing equity in their homes. This has been used to counter the arguments regarding the lack of savings. I think Copernicus had it right though, the overprice real estate is confined to not too many places. However, a lot of people live in these few places and thus the amount of money lent their is a lot. I actually think CDOs will start happening again but we'll see a lot more over collateralization, a lot fewer tranches, with more high quality bonds being issued.