A Good Primer on the Causes of the Economic Crisis
February 24, 2009 by Steel Phoenix
This is one of the most understandable and least biased explanations I’ve seen for the economic collapse.
I have a couple of minor criticisms of it:
The holders of sub-prime mortgages are portrayed as fat, cigarette smoking welfare parents who just buy the biggest house they can see and predictably fail to pay for it. I’m of the opinion that most of the defaults were not on the primary residences of the poor, but on those individuals who were trying to leverage their own moderate wealth into bigger payouts by buying several homes. The failures came when the credit crackdown prevented them from being able to sell it for enough money to meet their obligations. Those sub-primes which were on primary residences were fought for tooth and nail, because those families didn’t just stand to lose their credit rating, they stood to lose their homes and dreams for the future. In their position I would take on several roommates before letting them take my home.
In one part of the video, *POOF* all the money disappears. Wealth doesn’t just disappear. It either went somewhere else, or in this case, wasn’t actual wealth, but rather was the expectation of returns everyone had on their over leveraged investments. The illusion that what they were holding was owned by them, even though it was not yet payed for.
“In one part of the video, *POOF* all the money disappears. Wealth doesn’t just disappear.”
What you never had a friend who owned a boat? As they say, “It’s a hole in the water that you pour money into.: :)
There is a certain amount of truth to that, although in that example, you have some rich boat mechanics. I was just making some nice transom plates last week.
I tend to think of money as being the thermal energy of economics; as being neither created or destroyed, but merely transferred, I realize this isn’t strictly true. If your boat sinks, it is pretty hard to argue that wealth was not lost, but that is microeconomic function which, while important, seems less than relevant to our current crash. It should be offset by productivity. The productivity of the world is up. How can we have lost wealth? What we are seeing is a lack of demand, not a hole in the boat.
You still haven’t explained what you mean by “80 years of Democrat rule.”
What time frame are we talking about here?
And oh, yeah, of course there is “lack of demand,” our jobs have been outsourced.
Sorry about the delay, I do work for a living.
Even the jobs we outsourced are suffering. Look at the hit the Chinese economy has taken in recent months. We outsourced those jobs because we have been pretending our money is worth more than it is, while China has been pretending theirs is worth less than it is. You can try to blame it on corporate greed, but they would have taken those jobs sooner or later, whether we gave them to them or they just took our customers.
When I say lack of demand, I’m speaking more of a glut of supply caused by a massive increase in global manufacturing. The government strategy of trying to increase the workforce is counterproductive. We would be better served by going on furlough to prevent job loss and give people more of their lives back, or increasing quality rather than quantity to rise above Chinese goods. The problem will not be solved by sealing up the borders and going isolationist, or trying to out labor a billion Chinese.