Since 9/11 our government has struggled to keep our consumer confidence high, and our economic growth progressive. The time has come. Now we must pay for years of doling out risk ridden, free-flowing cash to the masses. After all, a Sub-Prime loan means that hundreds of thousands of dollars were given to an individual with poor credit, and they were not required to accurately or truthfully verify income or active employment sufficient for repaying the debt.
By the way, who’s idea was it to over-inflate home values?
Who started encouraging appraisers to bump up the value of homes in order to maximize the cash someone could extract from their equity via a home equity loan? They should be fired. (incidentally, credit score wasn’t a criteria for obtaining a home equity loan as long as there was sufficient equity relative to the amount borrowed)
Also, whose idea was it to allow the Ponzi scheme to spiral so out of control. This was no boom; this was an upwardly spiraling vortex that everyone knew would eventually come to a screeching halt. It was absolutely certain that everyone caught riding the vortex would come falling from thin air. In my opinion, federal regulators turned a blind eye for far too long, causing a ferocious frenzy until the predictable end.
Through their negligence and lack of oversight, we now have a government who is an active participant in the so called Ponzi scheme. There’s no gainful way out. Our government can only print money and lend it to itself —- with interest. As of the writing of this post, the Federal Government is announcing that they are lending Fannie and Freddie as much money as they need, for a 2.5% return.
Regardless of who bears the blame, the momentum has already shifted from boom and prosperity towards full blown — plug your ears —- depression. We may just skip the recession all together. Every indication is presenting itself, but nobody is talking about it — “They” don’t want to create a panic.
The writing is on the wall, and if history is the comparison, we have very few key indicators that are different in 2008. In 1929, there was a run on the bank deposits, and the stock market suddenly crashed uncontrollably on October 29, 1929. The period after the collapse of the nation’s largest banks resulted in the Fed’s inaction to save the smaller institutions. This time it’s the opposite, and there are stop-gap measures to prevent a sudden crash of the stock market. (essentially we’ll see a slower, more silent trickle downward of the stock market as we are seeing right now)
To date, we have had a progressive closure of hundreds of smaller lending institutions. The domino effect in today’s market conditions is the obverse of what occurred in the 30′s. All of the “little guys” have blown apart without any help from the government that essentially endorsed this messy scheme; one by one, each smaller failure leading to the largest and most critical lending failures of them all, IndyMac, Fannie and Freddie.
What caused the Great Depression? Too much debt? Poor money supply? Declining trade? Declining income? Government inaction & poor monetary policy?
The answer is: ALL of these elements caused the Great Depression of the 1930′s.
In 2008, what elements are plotting the course toward depression? I can’t tell you, I don’t want anyone to panic, but I will share something with you. The day that oil is no longer traded in U.S. Currency, and the day that you start seeing large Institutional investors (retirement/pension funds, etc.) shifting their assets from stocks to cash and international currency — run for the hills —- panic.
Until then, keep wondering whether or not we are in a “recession”. Oh, and don’t worry about your retirement, the economy will turn back around when we start exporting more war. We’re going BIG next time around!