Ecenomic Collapse and Depression
There have been a number of really bad fiscal decisions over the last decade made by the Democrats, Republicans and private parties which are starting to bear the fruit of depression.
Deregulation of the mortgage industry, cheap cash, manipulation of the interest rates, and devaluation of the dollar while maintaining tight control over inflation has started to brew up the perfect fiscal storm.
Most people overextend themselves; buy things they cannot afford, like houses. They were able to buy these things because of changes in credit and mortgage practices and laws. So, lots of people who couldn’t acquire a house 10 years ago, now have houses, but because things became excessively permissive, many of these people have homes they cannot afford, and people not have two or these mortgages on their homes that they used to pay off credit cards which are now maxed out again. This has all been dangerous but okay while the economy was growing, mostly off of people’s debt.
The economy started to go flat, interest rates started to go up, adjustable rate mortgages went up, people who could barely afford their payments couldn’t. This started an emergency, the government tried to fix the problem by changing the rules making it more difficult to obtain a mortgage. People can’t sell the homes that they cannot afford, because nobody else can afford them either, the foreclosures start. The lenders are losing money because the houses can’t be sold for the amount owed because the housing market has gone bust due to the changes in the lending rules.
The people who have purchased stock in these companies, the funds that have invested in them and the banks that have backed them are all suffering due this little storm. There has been a slow down in new construction, which is leading to increased unemployment which is leading to more unemployment. Commercial credit has dried up, so the companies that are dependant on it are starting to suffer. The Fed doesn’t have any room to help, so the government cannot float the economy the way it has over the last two years. This combined with China making motions towards destabilizing the dollar and the more hostile countries in the Middle East actively attempting to do so, things are getting interesting.
Although most of the players have changed in time, and some of the reasons are different, we are in the same place that we were in ’29. It took three years for the market to bottom out and the nation suffered terribly, and I believe we are on the cusp of this disaster once again.
Deregulation of the mortgage industry, cheap cash, manipulation of the interest rates, and devaluation of the dollar while maintaining tight control over inflation has started to brew up the perfect fiscal storm.
Most people overextend themselves; buy things they cannot afford, like houses. They were able to buy these things because of changes in credit and mortgage practices and laws. So, lots of people who couldn’t acquire a house 10 years ago, now have houses, but because things became excessively permissive, many of these people have homes they cannot afford, and people not have two or these mortgages on their homes that they used to pay off credit cards which are now maxed out again. This has all been dangerous but okay while the economy was growing, mostly off of people’s debt.
The economy started to go flat, interest rates started to go up, adjustable rate mortgages went up, people who could barely afford their payments couldn’t. This started an emergency, the government tried to fix the problem by changing the rules making it more difficult to obtain a mortgage. People can’t sell the homes that they cannot afford, because nobody else can afford them either, the foreclosures start. The lenders are losing money because the houses can’t be sold for the amount owed because the housing market has gone bust due to the changes in the lending rules.
The people who have purchased stock in these companies, the funds that have invested in them and the banks that have backed them are all suffering due this little storm. There has been a slow down in new construction, which is leading to increased unemployment which is leading to more unemployment. Commercial credit has dried up, so the companies that are dependant on it are starting to suffer. The Fed doesn’t have any room to help, so the government cannot float the economy the way it has over the last two years. This combined with China making motions towards destabilizing the dollar and the more hostile countries in the Middle East actively attempting to do so, things are getting interesting.
Although most of the players have changed in time, and some of the reasons are different, we are in the same place that we were in ’29. It took three years for the market to bottom out and the nation suffered terribly, and I believe we are on the cusp of this disaster once again.