I have had a number of conversations over the last week trying to understand this mess our economy is in. There are a number of theories, ideas and everything in between floating around out there. I don’t begin to understand the totality of it - but I do understand some of the fundamentals.
Here’s what I think I know about the situation:
- Mortgages are the root problem.
- The banking industry was selling mortgages to a lot of people who wouldn’t necessarily qualify for a mortgage without some of these special loans.
- A lot of the bad mortgages causing this problem were sub-prime or mortgages whose value was below the prime rate.
- There were a number of government programs that mandated the mortgage lenders make loans to those less fortunate.
- Fannie Mae and Freddie Mac knew a bailout was possible and therefore made more risky decisions based on the premise that they would benefit from a governmental bailout.
- This problem began more years ago than anyone, especially in this political climate, will give credit.
I’m sure there is a lot more information, facts, theories and such that are out there. But, this is my simplistic view. Here’s a great article by Thomas Sowell - “Bailout Politics“. He has a Ph. D. in Economics from Stanford and is really, really smart. There are a number of great quotes and insight in the article.
Entries (RSS)
I agree with you. It’s a mess and what’s really causing the mess is the media. I really think that people are simply scared to do anything and everything. No one wants to spend money on anything including marketing, which should be done more now than ever before! I’m also a fellow EO’er from NYC. Just my 2 cents…. Hilary
The economic crisis is caused by money laundering by a network of insurance companies owned by AIG. AIG’s subsidiaries take in billions of dollars of premiums and send the money to pseudocompanies in other countries where there is minimal regulation. They then “cook the books” here in America making their financial statements look huncho dori. Sound familiar? A little like the crooked accounting at Enron? You got it. After this is accomplished, the bastards that sent the money can then retreive it. This is THE CAUSE of our economic crisis.