Think of borrowing as buying money. It is.
People (and businesses and corporations) did rush forward to buy it. Once they had it, what was there to do with it? There was no new trend, no dot.coms, no high techs, no bio techs, no nothing.
So they went out and sold money. That is, they made loans.
There are two big retail loan areas, credit cards and housing loans. Both were pushed very aggressively. With cheap, cheap money available to finance home buying, that market heated up. At the same time, commercial interests started aggressively buying up loans, packaging them together, and reselling them as financial instruments. That created more desire to make more loans (sell money). Financial institutions bought more money (borrowed), in order to sell it at a profit (make loans). Since the loans were quickly resold -- and profit taken off the top -- the quality of the loans didn't matter to the people who made them. The housing market -- or rather the loans that fueled it -- grew into a bubble.
The subprime crisis, the housing bubble, whatever you want to call it, is not the problem.
It's a symptom of pumping in money with no place to go.
Other symptoms are no job growth, no business growth, no stock market growth, falling median incomes, disappearing pensions and health plans, and the fall of the dollar.
When Bush came into office, a Euro cost 95 cents. Now it costs a $1.50. The Canadian dollar (the Loony) was 70 cents. Now it costs a dollar. Most mainstream economists and pundits will opine that a low dollar is good for American industry, because it will help us sell our goods. That's only true if we're producing things that no one else is -- or producing them better or cheaper -- and we're not.
Also, many foreign exchange rates are being kept artificially low against the dollar. Some, like many of the oil countries, are pegged to the dollar. They're making up for it by raising the price of oil (currently traded in dollars). Others, like the Asian manufacturing countries, are keeping their currency down to retain their edge in selling here, thereby canceling whatever advantage we're supposed to get from declining currency.
One way to think of what the administration has done, is as a leveraged buyout. That's when someone buys a company, using the company itself as the collateral for the loan used to purchase it, usually at very high interest, then pays off the interest by cutting the work force and salaries, selling outsets and even breaking up the company.
It's good for the guy who makes the deal, skims the cream off the top and gets rich. (The company that Mitt Romney got rich working for specialized in doing that.) It's good for the lenders, who get a good return (if the buyer is able to squeeze enough money out of his purchase), but it's bad for the work force, bad for the company, and, if no one comes along to replace it, bad for the business as a whole.
We've experienced a leveraged buyout of the national economy.
Our politicians, the media and economists are just now waking up to the fact that the economy is in trouble.
The current numbers make it clear that we are probably in, or probably headed for, a recession.
Also, the polls show that people are concerned about the economy, and it's an election year. The people are out ahead of our governing and media and professional economic classes on this, because they live in the real economy, the one that's been leveraged, and the professionals are either in, or work for, the investor class that has been doing well.
So there is, at last, talk about doing something about the economy.
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