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American economy question

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0ptions
Posts: 2198 - Karma: 60
Maybe one of you can help me,

I know some one to the current economic crisis in the US was the sub-prime mortgages and bad lending, but what are some others. Would a high public debt be one? or overspending? and if so how do they hurt the economy?

I'm writing an essay that is essentially arguing that the American economy will continue to suffer unless they can implement policies that will stop business or the government for that matter from making unsound economic decision. I have one point on the mortgages or lending but any suggestions? 
Jan 7 2009 4:12PM
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RudyGarmisch
Posts: 25443 - Karma: 13,844
I wouldnt trust NS for essay information. Ever.
Jan 7 2009 4:19PM
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0ptions
Posts: 2198 - Karma: 60
Aha i know, i just needs some ideas cause my dad wont give me any and once i have em ill research them and run them by him. google seems useless on this one.
Jan 7 2009 4:22PM
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hype
Posts: 1440 - Karma: 21
low or no confidence in the govt, or any other leaders.

growing world market( look at detroit, having a hard time competing with toyota, honda, ect.)

Collapse of banks due to the housing turmoil
I'm not sure what you have on the "housing crisis" but you really need to get into this because so many problems started here and trickled to everything else.

Because of the housing crisis, there are alot of people that got kicked out of houses they couldnt really afford, bc of this there are many empty houses, these houses dont need certain products which slows down the economy even more, Many construction workers and anything like it are out of jobs, therefore not contributing to our economy and some are hurting it by unemployment ect....

finance people are cutting back on employees to. So with all of these people with out jobs, people cant consume as much so big and successful retail companies such as circuit city(bankrupt) and best buy (fired a ton of people) ect..... its like a never ending ciricle

sorry for rambling but i think a chain like this is a good way to show this problem.

hope that helps
Jan 7 2009 4:36PM
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freestyler540
Posts: 13083 - Karma: 18,725
Its the domino effect, I dont want to do too much in detail:

Republicans lowered the leverage that banks must posses.
Banks issued sub prime morgages without backed security
Everyone jumped on the opportunity and the banks sold the morgages through the stock exchange,

People could pay their high morgage rate once the sub prime went over prime,
People lost their houses, while having large bank and credit card debt
banks could not pay back the loans because of losses of customers through bankruptcy
Investers pulled out of bank stock and then other stock to cover their loss
Stock market tanked due to the low demand and high stocks of products.

People cut back items, making companies using leverage to go out of business (like the car industry)
Those industries either close or cut back, creating a drop in disposible income, cutting consumption.

Why the bailout failed:
The republican party threw money into the economy without any plans. the companies used this money to pay their wages or buy other companies. Some banks bought small banks that were in debt, then the big bank was stuck with the debt, forcing them to close.
Jan 7 2009 5:10PM
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ROOS.
Posts: 1992 - Karma: 39
ahhh but even toyota is starting to feel the effects of the recession their sales are down more than they have been in like 50 years or something
Jan 7 2009 5:13PM
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hype
Posts: 1440 - Karma: 21
republicans? This did not have anything to do with the republicans.... there were huge mortgage companies that were giving out loans that people could not afford and they knew it, and so did the mortgage brokers. They did this because the values of houses have been going up historically pretty much forever. So the people in the houses would have added equity in the houses and would be able to afford the loans. When the house prices went down, and the rates went up, the people were screwed. In some cases these people were mis informed but in others, they should have known what they were getting themselves into. I mean no money down?! wtf?

and when you said people could pay their high mortgage rate once the sub prime went over prime?! um.... if your mortgage went from sub prime to prime, your rates would go down.


Jan 7 2009 5:16PM
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jibsworth
Posts: 1554 - Karma: 12
credit default swaps and over leveraging.
I have a sick article from the dude who wrote liar's poker, if i can find it you will learn something... what grade/year are you writing this for?
Jan 7 2009 9:45PM
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jibsworth
Posts: 1554 - Karma: 12
http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom#page1

boo yah.. read this bud, all nine pages. msg me is you don't understand anything, some of the mortage backed/collateralized debt/cds talk is pretty heavy
Jan 7 2009 9:53PM
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BenJAMIN4aWhil3
Posts: 773 - Karma: 12
alright first off.... lets not blame on party or another.. because as much as people want to blame the republicans... its bill clinton who signed the bill that put pressure on fanny may and freddie mac to deversify their porfolios to over 50% high risk loans, and it was that moron barney frank that was behind the bill. That is fact. look it up. And as far as this bailout is concern, both parties are to be blamed for its failure because both parties were tacking on huge earmarks to it and its the democrats who have BOTH the house and the senate majority. So no. Its no the republicans did this and that. It was both parties. They both screwed up.
Jan 7 2009 10:50PM
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C.R.E.A.M
Posts: 2987 - Karma: 4,575
im gonna need a more specific question but i can help
Jan 7 2009 10:53PM
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skiminnesota
Posts: 9093 - Karma: 429
im sorry, you need a Click for larger image


yeah this is all the "republicans" fault...

why dont you do a little research in the CRA (if you even know what that is?) and who put it into place, and who expanded it. then why dont you go look at the ammount of mortgage debt this country accrued from 1990 to 2000... then you get back to me as to how the evil "republicans" are to blaim. 
Jan 7 2009 10:59PM
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BenJAMIN4aWhil3
Posts: 773 - Karma: 12
and now a quick lesson on how all of this works... because very few people actually realize whats going on.

Years ago when you went to the local bank to get a loan to buy a house, that bank would lend you the money (if you qualified, which was not easy, and shouldnt be easy...at all) and that bank would hold the note on house. When you paid your mortgage, you paid your local bank. End of story. Today, when you get a loan on a house, it starts off the same way, but rather than holding the note on the loan, the bank packages all of its loans together, often with the loans of other local banks and then sells those notes to whats known as a mortgage backed security. When you are paying down your loans, your actually paying whoever is holding that MBS. It began to get even worse when those MBS were getting sold to even larger securites and being leveraged and traded by headge fund traders. Now heres where it gets interesting. You have these multi-billion dollar MBS and 10s of billions of dollar securites floating around from one holder to another, and then all of a sudden, these people who were given high risk notes... or those who were taking out variable interest rate notes were starting to not be able to pay their loans. In actuality, only about 3% of loans have defaulted... but because of these GIANT MBS that 3% are causeing them to collapse.

Jan 7 2009 11:01PM
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whattheshit
Posts: 6562 - Karma: 107
people spending and borrowing beyond their means.

market is running on fear.

deregulation.
Jan 7 2009 11:02PM
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coolhandluke
Posts: 4465 - Karma: 153
plus considering that less than 2% of NS knows about mortgages. 



Jan 7 2009 11:07PM
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babujib
Posts: 5039 - Karma: 104
you are either misinformed, or ignorant. look up the community reinvestment act, its basically the reason why the whole sub-prime mortgage incident happened. democrats were all for it.
Jan 7 2009 11:14PM
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Silence
Posts: 16030 - Karma: 150
The US govt should just go and print a shitload of money.
Jan 8 2009 12:00AM
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.KYLE.
Posts: 1891 - Karma: 59
Like totally, Send every American like 2 million dollars, poof every economic problem gone!
Jan 8 2009 12:05AM
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Silence
Posts: 16030 - Karma: 150
I was clearly joking - although it may get to a point where there is some economic merit to printing more money
Jan 8 2009 12:06AM
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.KYLE.
Posts: 1891 - Karma: 59
I'm joking too, and I figured you were too.
Jan 8 2009 12:07AM
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Silence
Posts: 16030 - Karma: 150
haha you never know on this site
Jan 8 2009 12:14AM
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BlueSteele
Posts: 13839 - Karma: 7,704
Where do you think the stimulus package Obama is promoting is going to come from....?  Our extra cash?  He's going to print it.  It's a short term solution, but it's a basic economic principle that stimulus packages are ultimately detrimental.  I am kind of worried about these ideas the government has because they all involve giving people money that the government doesn't have.  Are we going to BUY our way out of what we BOUGHT into?
Jan 8 2009 12:14AM
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coolhandluke
Posts: 4465 - Karma: 153
its actually pretty sneaky in my opinion. no public entity (city, state, port, water district, PUD, etc) will turn down free money. and since the stimulus package is giving it away to them, theyre all lining up their proposed construction projects begging for "economic stimulus money". and thus it appears that all the public entities fully support obama's economic stimulus plan.
Jan 8 2009 12:31AM
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Silence
Posts: 16030 - Karma: 150
^ It's interesting when you think of it that way..
Jan 8 2009 12:34AM
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coolhandluke
Posts: 4465 - Karma: 153
its because i helped a few of them make their projects look all shiny and prime to be selected to move to the top of the list.

instead when the priority list was released, it was then revealed that "job creation" was given the highest importance rather than true need of the project.

a long road literally in the middle of nowhere (and not on any major thoroughfare or trade route or anything) was given the highest priority in our county rather than shorter projects dealing with traffic flow in town.

and now APWA is begging congress to get watermains and other wet utilities' projects added instead of just being paving projects.
Jan 8 2009 12:39AM
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Silence
Posts: 16030 - Karma: 150
Honestly i think increased transparency and regulation is an area to look at, otherwise it doesn't matter how much money gets flooded through your economy, the system has the potential to rebound back to where it is
Jan 8 2009 12:42AM
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coolhandluke
Posts: 4465 - Karma: 153
exactly.

the spending of money and the creation of jobs are being touted much higher than actually accomplishing needed projects.
Jan 8 2009 12:45AM
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Ski1erman
Posts: 124 - Karma: 10
bahahahahahaha


is this serious? because it was Carter who put into law the CRA, it was Clinton that expanded it... it was the federal government telling fanni and freddy, go ahead and buy up bad mortgages, we've got your back...

but yeah its those republicans fault. grrr!

o i bet you are to thick headed to know who has been running congress the last couple of years...
Jan 8 2009 1:27AM
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r3dbullninja
Posts: 274 - Karma: 13
another big problem is the weakening of our currency, just thought I would point that out. Printing more money will only inflate, cause the dollar to fail even more, and our foreign dependance will heighten, which is exactly what we used to trying to get away from
Jan 8 2009 3:00AM
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Silence
Posts: 16030 - Karma: 150
Foreign trade has a larger impact on exchange rates, which would be triggered by inflationary measures such as cash injections etc.
Jan 8 2009 3:32AM
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freestyler540
Posts: 13083 - Karma: 18,725

The blame does not sit with the republican party (I did notice the hardcore republicans on NS rejected my explaination violently, then followed with more insults) Republicans just wanted the free trade ideology pushed, the best way was to let the banks regulate themselves. They did not anticipate the banks to get greedy.

 The blame is sitting with the banks and the overspending of americans. The sub prime morgage rate is many point under prime rate (sub means below). But, at sub prime, the bank will never make a profit, or even worse take 100years to pay off. So, they jack their rates way above prime...something nobody read. It happened at once due to the high sign up rate to that morgage.

The CRA was put into place to prevent banks from discriminating against lower income people when it comes time to credit. It is a democrat's bill to let the poor have a chance at credit.

SO people chill out, before posting a response, take a breather. Im not an american and all my explaination was simply an observation. Was I wrong yeah, im not an expert. Try to see a different point of view before insulting the other because a different reasoning was used.

Jan 8 2009 1:39PM
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Casey
Posts: 7849 - Karma: 24,323
Well its essentially just keynesian economic theory.. the govt goes into defecit during recession to help the public sector, and once they are out tax revenue increases to pay it back. Not saying i agree with it or not, Im just saying the government is the only tool left at this point to mediate this business cycle. Some say we should just bite the bullet and get fucked over now so that this doesn't keep happening again and again.
Jan 8 2009 4:26PM
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Thenowhereman42
Posts: 5682 - Karma: 65
Thats a really stupid essay topic.

Theres no way the government could implement policies to prevent themselves from making unsound economic decisions without taking the power away from themselves to make any economic decisions at all.  the economy is such a variable thing that predictions on whether a policy is sound or not are left up to the personal idealogical beliefs of the person making the predection.  Any economic decisions are going to be bad in the opinions of some political analysists but good in the opinions of others, so there really is no way of determining whether an economic descision is unsound or not untill it has already been implemented.

And implementing policies to prevent buisnesses from making unsound economic decisions goes againt the free market system, so in order to do that you would have to rethink the entire U.S. economic system. 
Jan 8 2009 5:38PM
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skiminnesota
Posts: 9093 - Karma: 429


the banks had their arm twisted into giving people who SHOULD NOT own a home, and then getting them into a home loan.... the banks are NOT going to give money to people who can not pay it back.. well actually they did, but there are a variety of reasons to explain that... the CRA, fanni and freddy getting a get out of jail free card, and more im sure..

so in the end, banks should discriminate based on income? Mr jones, you dont make enough money to qualify for this big of a loan.....

thanks for correcting your little slip up about those evil bastards in the republican party... but hey, its in style to hate them so good job hopping on that bandwagon...
Jan 8 2009 6:05PM
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