My problem with the narrative is that it completely under-plays:
1) The damage done by over-leveraged Credit Default Swaps (roughly $43,000,000,000,000 - $70,000,000,000,000 (that's TRILLIONS!) of them were taken out and need to be accounted for. The story only faintly mentions them, but they're a far bigger problem than the number of foreclosures on the market.
2) The fact that the "investment banks" bought the CDOs and put them on their financial books at a value of (X) but have NEVER devalued those CDOs even though everyone knows housing prices have gone down. These are the "toxic papers" we keep hearing about. The CDOs do not have a real value and the banks are refusing to let anyone put a value on them. The banks say they're worth billions, and could only be worth a few pennies on the dollar, if even that much.
3) The fact that not only did we buy too many McMansions, we also bought too many Ford Expeditions, too many 55" flatscreens, and too many Blue Ray Players. We bought so much that the "businesses" had to ramp up to meet our demand. So "The Big Three" automakers got used to selling 15,000,000 cars per year, and builders were used to getting $600/foot for housing in California, and all of these businesses had to "borrow" in order to increase their production. So after about 5 years of binging, we had filled every room and every garage and every warehouse space with crap. Not only did we run out of credit, but we ran out of needs! And suddenly "The Big Three" only need to produce 7,000,000 cars per year. And builder's realized they had more houses than we had families. But the homeowners were in debt to their eyeballs and the businesses had over built and they're in debt to their eyeballs. My point being: the businesses all over sold to the market. Nobody NEEDS to buy any more. We already have everything we NEED for our lives. But our "businesses" are addicted to our over consumption. And our "businesses" are forcing our government to perpetuate the buying and the endless debt. Lower our taxes so we can spend more. Give us a $15K tax credit to buy a house we don't need. Give us a $7K tax credit to buy a car we don't need. And we should all ignore the fact that our government and our "public services" are only alive because of these taxes that we're not going to be paying. And that this money is a debt upon our future generations.
Anyway, I propose that unlike the cartoon's theory, the banks could handle people foreclosing. They can't handle paying back the credit default swaps or the damage of re-pricing their CDOs. And our businesses can't handle the adjustment to a non-debt-based economy.
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