If someone offered you $10 for your car, you would most likely be insulted at such a ridiculously low price. The obvious reason is that the value of the car is many thousands of dollars greater than the offer. Let’s assume, however, that it was the only price being bid for your car. In today’s world of instant financial journalism and the Internet, word would spread that the price of cars had plummeted to $10.
Holders of loans against cars that had been financed would panic….
“Pressure would be brought to bear by their financial backers and shareholders to raise new capital to reinforce their now dramatically impaired balance sheet as all of the cars held as collateral has now precipitously dropped in value.
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