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I can't understand what motivates people to borrow the highest amount the banks will lend them. What do they think is going to happen when interest rates go up two or three percent? What do the banks think is going to happen?

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The banks think they'll be bailed out. Maybe not in a US way with direct cash injection but maybe in an EU way with the government creating a Bad Bank and buying their mistakes at above market rates. Of course they'll lie about it and say it's a good investment to sell it to the public.

Everyone who has money is beholden to the banks.

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