Americans have little or no savings. When a family needs savings as a fall-back plan there are no savings to speak of. Money must come from other areas. Since 1994 savings as a percentage of disposable income dropped like a rock. See this chart for an alarming look at history. The subprime and predatory lending industries started in full swing by 1994, which flows perfectly with the chart referenced above. For more on this subject refer to our “History of Subprime and Predatory Lending.”

Americans with little or no savings relied on second mortgages and credit cards, and later refinanced to pay those off with creative mortgages. I suggest to you that the refinancing cycle happened more than once in many American households.