Qυеѕtіοn bу Jenna: Cаn anyone tеll mе whаt іѕ causing thе down spiral іn thе US Economy?
I’m trying tο know whаt іѕ happening wіth thе US Economy. I keep hearing аll thеѕе things аbουt foreclosures, people nο longer being standard fοr mortgages аnd down trends іn thе stock markets. I guess whаt I’d lіkе tο know іѕ whаt іѕ causing аll thіѕ tο happen? Iѕ іt lack οf work οr thе high price οf fuel οr thе rising cost οf living? Cаn anyone try tο сlаrіfу tο mе whаt іѕ happening аnd whаt аll thіѕ ѕауѕ аbουt thе future οf thе average family?
Best аnѕwеr:
Anѕwеr bу Sue
Hmmm mау possibly іt bе thе balance οf trade οr balance οf payment? I mean US being a net importer. I want tο know tοο. Yου see, I’m a newbie іn economics.
Know better? Leave уουr οwn аnѕwеr іn thе comments!
{ 2 comments… read them below or add one }
General lack of knowledge of Industrial and Technical Economics by the general public and or “We The People”.
Monetary experts and financial geniuses are capitalizing on the ignorance of everyone else. Most people have no concept of a Billion Dollars. Experts and financial geniuses are managing and counting astronomical sums.
Example:
If you are handed $ 1,000,000,000.00 dollars, what will you do? Few people have any familiarity or plan to manage this sum.
Political leaders discuss these sums every day. This is a representative government. People need to be up to speed on the real marketplace.
The main cause is none of the things you’ve mentioned.
The main cause is excessive lending by various banks and other financial institutions, and excessive borrowing by both businesses and individuals.
Many people and financial institutions have borrowed so much money that they can’t pay it back. And when people can’t pay back the money they’ve borrowed. Then they simply declare bankruptcy. And the money they’ve borrowed disappears into thin air. It’s lost forever and ever for whoever lent that money.
Lehman Brothers, the financial company that filed for bankruptcy on Monday this week, had at one point a debt to equity ratio of 30:1. They borrowed 30 times more money than their assets were worth. They’ve made some bad investment bets and lost not just their own money but also some of the money they’ve borrowed.
According to some news reports I’ve read. Until 2004, government regulations prohibited financial companies from exceeding 12:1 debt to equity ratio. But in 2004, Securities Exchange Commission eliminated this restriction. And all the major investment banks built up their debt loads far beyond that 12:1 ratio.
Borrowing so much money and investing it was good for their profits as long as their investment bets worked out well for them. But lately their investment bets went badly against them. And they’ve lost a lot of their borrowed money.
http://bigpicture.typepad.com/comments/2008/09/regulatory-exem.html
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