What skittled the sub-primers in 2007/08 were the ‘recasts’ (here super-low opening ‘teaser’ rates designed to lure the vulnerable in are ‘recast’ to charge the genuine underlying exhorbitant loan-shark rate which the lenders’ business plans were originally predicated on).

Accurate charts for recast schedules of 2010 are harder to come by (most compare with reset data), however, the bad news is that with US unemployment at 10% the recasts of 2010 on even the highest grade mortgages are likely to have almost as bad an the impact as the recasts on sub-primers did in 2007 – plus many of those subprimers who didn’t hand in the keys in 2007 and struggled on against impossible odds may end up defaulting in 2010 afterall due to rising unemployment or because their subprime mortgages are set to recast upwards AGAIN in 2010

This picture is not true across the USA however, most recasts of whatever nature are concentrated in California, hence the endless stream of Fed closures of Californian banks this year and the collapse of the Californian budget.

As the article explains it is the scale of the leveraged derivatives which were derived from the ocean of US sandcastle-ownership makes this crisis almost bottomless, the return of the Crisis is not really linked to mortgage resets or recasts in 2010; it is linked to the withdrawal of unsustainable stimulus packages, as soon as they are withdrawn we all fall back into the abyss as the derivatives market was leveraged to create fictitious money which can never be repaid (except through a decade-long Depression) as it was equivalent to twice the entire planet’s GDP! That will be the ‘reset’ moment for us all, shame we can’t all ‘hand the keys in and move on’.