Comment: On What Caused the Economic Collapse

During my brief excursion, readers, I had a chance to talk to some of my relatives that are or have been employed in organizations like the UN, the World Bank, and the IMF. And, my own views included, there was never a consensus on what has caused the economy to drop so much.

One said that it’s a direct result from the subprime mortgages, and the banks went bankrupt because they took too much of a gamble in granting said mortgages, as the subprime folks couldn’t repay their loans, and proved they deserved the “subprime” tag.

Another said is that it’s not the banks, but the government, in supporting the subprime mortgages, as well as the extensive borrowing in the public sector, hence our massive national deficit and our addiction to borrowing from the Chinese. Another key issue that was raised was inflation – the dollar’s value has decreased without wages going up to compensate for it, so real wages have gone down, resulting in worse buying power for the public and private sectors, which ultimately leads to more borrowing.

The third said that, for America, it’s just a psychological issue. People see the market going down, so they feel worse and insecure, so they sell – and, as a result, more people sell because they’re anxious that other people are apprehensive about the market. The reverse is true: when the market is true, more people feel optimistic and buy, and, again, the optimism is contagious, and more people buy. What’s needed to turn the market around? The courage to buy.

All interesting takes, and somehow, I think that all of them are true to an extent. With a collapse of this magnitude, I don’t think that there is a distinct cause — the market was pushed off the edge little by little, not with one fell swoop.

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  1. thebeadden

    Welcome back, Leap. I hope you had a nice break.

    You have family in those organizations? Oh, to be a fly on the wall…

    Whatever the real reason behind this or the cause, one thing that bothers me, is that anyone that knows anything about the economy, anyone that has held any position in these organizations, banks, government had to see it coming. And they said nothing.

    They knew the average person was going to get screwed over in a big way and never sent a warning. Many people could have prepared themselves years ago had they been given a heads up.

    And who is going to benefit from this? The big guns who will buy up everything and maintain or even strengthen the powers they already have.

  2. As to who’s going to benefit…? The government. That’s it.

    Yes, I do have family in those organizations. Pretty darn cool, isn’t it? Too bad we’re all bourgeois elitists, right?

    There were some senators, as well, sounding the alarm about the economy very early, most notably Ron Paul. I like him economically, but I disagree with him on a few issues (abortion, among others). Some did send a warning, but they were drowned out by the supposed health of the 10,000+ point DOW.

  3. thebeadden

    LOL, Leap.

    Now don’t get the impression that I think everyone who is in power is the bad guy. There is good everywhere. It is just that in many cases those people don’t get to do the good things they want to.

    As for the super educated, the rich, the corporations and politicians. The same thing goes.

    We need all of those things to grow and survive. Rich people are my bread and butter and are for most people. We all need jobs.

    The issue I have is when the average person is getting screwed over by people who can afford to provide better services to them.

    We will always need a lower class. But when these people have to suffer to make ends meet, there is a problem.

    Just providing health care would ease the burden on people. Just give a break somewhere so it is not so hard.

    Ron Paul is a given. But he is called a whacko. The only person to tell the truth and he is mocked. So no one took him seriously.

    Ah, life…

  4. Yes! Yes! Yes!

    Agreed, but, then again, that’s directly against most of what Ron Paul advocates, considering he’s hardcore laissez-faire.

    On national healthcare: the argument against that is that the private sector may be able to provide better health-care than a bare bones state run package, so we should hand the keys over to the private sector. Competition is good. That’s why I think a private plus public solution to health care is needed, like the one used in Britain (I believe).

    The average person, in dealing with the private sector, should vote for their wallets more often in the event that they do get screwed. What’s the best way to avoid supporting a company? Buy someone else’s product. It’s sort of hard to do with corporate monopolies, however — when one group controls so much of the market share that it’s just about impossible to buy something outside of the parent company.

    I’ll stop there.




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