The Next Great Depression?
Posted on Sep 26, 2008 - 9:11am by Michael in Economy
With the crash of the financial sector last week the U.S. economy is facing extreme danger. Lehman Brothers melted to the ground with the lack of capital to continue operations. AIG was facing the same fate until the government bailed them out by giving them around $85 billion.Merrill Lynch was potentially looking at the same fate as Lehman Brothers until Bank of America swooped in and bought them for $50 billion in stock. Banks across the country are struggling, several banks have already failed, and many are on the brink of failure due to the mass amounts of home foreclosures that are causing billions of dollars of losses. Fannie Mae and Freddie Mac were taken over by the government recently in hopes of preventing their failure. They hold nearly 50% of all mortgages in the United States.
So what does all this mean? Are we headed for the next great depression, are people going to start losing jobs in mass numbers, and is the standard of living for most Americans going to go down? These are just a few of the questions many Americans are asking these days. People around the globe are asking these questions too. Our economy is facing an extreme melt down that will affect everyone if something is not done to stop it.
Have you heard of the government’s $700 billion bailout package? Most people have and most people have an opinion on the matter, which they should. There is one major problem though most of the people that vocally state their opinion don’t have the slightest clue what is at stake. They just know that they don’t want to be spending there hard earned money to bailout wall street and the financial sector because they weren’t part of the problem.
Let’s stop here and think for a second. Does the majority of Americans have a job or own a business? Yes! Does the majority of Americans have a car that they make payments on or made payments on? Yes! Do a large number of Americans have a mortgage? Yes! Does the majority of Americans own a credit card? Yes!
Ok so now let’s take a look at what could potentially happen to our economy and your way of life if something is not done to help stop the economy from burning to the ground. It starts all the way at the top and it will affect most everyone all the way down to the bottom.
With banks not willing to loan money because the risk is to high businesses that rely on that money to operate and pay there employees will fail. People will start to lose jobs at alarming rates. Without the means to make money people will not be able to spend money to make their car payment, there mortgage, their food, their clothes, etc…. This would result in more businesses not making enough money to operate and pay their employees which means more people lose their jobs. Businesses would not be able to obtain financing to operate and people would not be able to get loans to buy homes or cars. We are staring at the next great depression straight in the face. If people do not realize this they are living in fantasy land.
It’s really easy to complain about things such as high energy costs and high food prices. Yeah high gas prices suck for most everyone. Yeah people are loses jobs at an alarming rate. Complaining about something is not going to fix it. We all need to help be part of solution even if we had nothing to do with the cause of the problem because the problem will affect everyone if nothing is done. If the $700 billion bailout is our best option then we all need to support it whether we like it or not.
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There’s far, far more to this fiasco than bad mortgage loans and money to bail them out: the total cost of all of the bad mortgage loans-and delinquent loans out there floating around is about $100 Billion. So, what’s the other $600 billion for-and who? And, why does the Fed want all of this unConstitutional “control” of our tax money?
One thing’s for sure, an economy that’s built on credit and derivatives isnt much a true economy. And the way these politicians have got their panties in a wad over it says they’re either aftaid they personally are going to lose big bucks-or that they’re all going to jail! Lets face it-you cant sell the same mortgage seven times and still balance the check book. My attitude on the banking industry is that, if I cant do it in my checkbook, you shouldnt be able to, either. We have a bunch of folks out making the rounds of all the newsgroups and blogs trying to convince us all to bail their sorry butts out-yet, nobody’s coming clean on exactly what the ENTIRE problem is-or why it will be worse than driving inflation sky high thru yet another huge infusion of monopoly money that will ensure Grandma’s social security check wont even buy her bus fare. but, then, I guess some animals are born more equal than other animals, huh, Winston?
Interesting article , is this the next house of cards, about to fall and if it does ,whats next for all of us ?……
The US economy and the economies around the globe are in serious trouble right now. The $700 billion bailout most likely won’t solve all of the problems with the economy, but if something is not done it may not be possible for it to recover.
Thanks Linda, you make lots of valid points. I do believe the $700 billion is the total they want available. Since the details of the bailout are still being ironed out things keep changing with it. A big part of what the governemnt plans to buy are the mortgage backed securities. I believe that will be the biggest portion of the $700 billion. From what I understand only about half of the $700 billion will be available unless the rest is needed. Not all companies will want to take part in the government buying their bad debt.
I think lots of things have been done wrong and that is how we got to where we are today. My point in the article was that regardless of how we got here or who is to blame it would be far far worse to sit and do nothing that it would for all of us to support the bailout if that is the best option we have right now.
I disagree.
I think doing nothing is EXACTLY what needs to be done.
I agree with Mickey but we got it so now we live with it!
It’s tolerable to me except for all the damned pork thrown in there. What was it 1.5 billion or 100 billion!
Just once, I’d like a bill go through Congress with the original intent and only that in the language. A novel idea!