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Experts have been talking of a possible recession since the 2007 subprime forclosure fiasco and higher fuel prices put the economy into a slide.
The subprime disaster is quite complex, in basic form it goes like this. Many working people bought houses a few years back while house prices were rising. Because it appeared that one could buy a house and have significant equity in just a few years, homeowners opted for a split mortgage where the rates were quite low for a few years then jumped several points at a specific date. The logic being that one could refinance the mortgage before the higher rates came into effect. What happened for many was that housing prices declined and refinancing was hard to find for people with little, zero or negative equity. At this point some homeowners were stuck with a mortgage payment that jumped hundreds or thousands of dollars a month. Many homeowners just didn't earn enough money to pay the much higher mortgage payments that they knew were coming because for years they assumed they could refinance before the higher rates kicked in. Some were forced to forclose.
-For the complex theory follow this link http://en.wikipedia.org/wiki/2007_subprime_mortgage_financial_crisis
At some point in the last days of 2007 the white house realizes that a fiscal stimulus plan is nessacarry. A true group of leaders would have acted quickly, alerted congress and pushed out a package within a few days. But no! not the Bush White House. This group of hacks figures this fiscal nightmare could easily be turned into political clout. The White House confers with US Fed Chairman Mr. Bernanke who waits until January 17th to advise the US House Budget Committee that an economic stimulus package will help avert a recession. President Bush soon endorses such a package.
Congress then goes to work. At first house Republicans wanted an extension to Bush's tax cuts for the rich that expires in 2010. Republicans quickly abandoned this idea. Why? maybe so congress could unveil a final plan by the Jan. 28 State of the Union address. Now the President has something to talk about in his last State of the Union address. The activities might have been more complicated but one thing is certain, the White House is timing the stimulus package with the State of the Union address regardless of who needs what when.
How long was the fiscal initiative delayed so it coincided with the speech? days, weeks or months? Only the White House hacks know. Now due to the package's percieved weakness and possibly its lateness most global stock markets had thier worst plunge since 9/11. Here are some of the results.
Britain's FTSE-100 slumped 5.5 percent to 5,578.20. France's CAC-40 Index tumbled 6.8 percent to 4,744.15. Germany's blue-chip DAX 30 plunged 7.2 percent to 6,790.19. India's benchmark stock index tumbled 7.4 percent. Hong Kong's blue-chip Hang Seng index plummeted 5.5 percent to 23,818.86 .Canadian S&P/TSX composite index on the Toronto Stock Exchange down 4 percent. Brazil, stocks plunged 6.9
Thank you Mr President for another trillion dollar mistake.
