I believe the US over-innovated its financial processes. Making it easier for less financially secure folks to engage in debt instruments they could not even be expected to understand. We were seeing things like "sub-prime mortgages" and "125% financing" that only made sense in specific circumstances, like a growing economy.
Making it much worse is the practice of "bundling" hundreds of thousands of these shaky debts into collateral or guarantees against other loans, and those expected debt profits are then used to guarantee still more debt. The companies that rate these securities bowed to financial sector pressure to give them higher ratings than they deserved.
When folks can buy more houses than they can actually afford, not only are there government "anti-poverty" programs lurking somewhere in the background, but there is a period of time when the market doesn't have enough inventory, and we saw the results in television programs such as "Flip This House." Prices rise so fast that people paid too much for a house knowing they could still sell it for more.
Democrats are always looking out for a way to look like they are on the side of "the poor" and Republicans - who tried to stop this - have no defense against the charge that they want grandma to eat dog food, so the process has no check.
When oil prices spiked because of (again - the expectation/speculation of) Chinese and Indian demand, the house of cards started falling apart.
Those banks that were heavily vested in sub-prime stuff collapsed almost immediately, scaring the bejeepers out of the rest who quickly tightened up lending requirements. That made it difficult for the marginally successful companies to find the survival financing they needed. Which leads us to government bailouts.
The US is the unquestioned global economic power. When we sneeze, the world catches pneumonia. Global demand for oil has plummeted to the point that speculators are yawning with OPEC threats of production cuts.
Anti-US saber rattling is purely based on oil. Venezuela has few oil customers beside the US. Russia's tough talk is all based on their oil wealth. I have absolutely no evidence, but the paranoid conspiracy theorist in me wonders if the slowdown might not have a geo-political strategic purpose as well.
News outlets are under tremendous pressure. Saying a newspaper makes money from telling us the news of the day is like saying a billboard makes money by giving us something to look at. News outlets are billboards, they make a living from advertising, not selling news. The more emotion (fear and anger) they can pour into a story the more attention they get and the more they can charge for the same 2" by 4" ad. Even under these scary economic times, news ad revenue is nose-diving for a number of reasons. They are panicking and are desperate for "bad " news to get your attention. They are going to encourage us to fear and anger to sell billboard space. This is going to be a difficult period for us. We were already too hostile with each other before this. My greatest fear is not that I'll lose my house (I might - you might) but that we'll degenerate into a bunch of mindless thugs out only for ourselves. God help us.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment