Paul O’Neill, the former truth speaking Secretary of the Treasury, had a good analogy to explan why the subprime issue has spread to the rest of the economy (h/t my dad).
To paraphrase: imagine you had ten bottled waters; one of which contained poison. Without knowing which one, would you take a drink of any?
This would be a good analogy were sub-prime mortgages truly the only issue. In fact, O’Neill is blind to the reality of much wider problems.
A more accurate analogy would go as follows:
1. Imagine you have ten bottle waters and you are told by the Federal Water Reserve that one contains poison.
2. After watching someone pick one of the bottled waters and then promptly die, you then observe another person pick a different bottled water and then promptly die as well.
3. Would you drink from any other bottles?
All houses are infected with the poison of bubble prices. Those in the sub-prime category were just the first to become insolvent and the only ones without a PR firm or lobbyists to defend them.