posted on Mar, 11 2009 @ 12:30 PM
The following is mere opinion based on my observation as to what happened with the consumers and banking. I'm not an economist, merely
someone with a bachelor's degree (Biology) and ten years in banking:
I had been doing a lot of thinking and a lot more watching as daily declines over the last six months. The story begins 14 years ago with a
post-retirement dependency shift of workers from pension funds to 401k. If this were the only move the country made, then there would be no issue
with a downing market (however neither would there have been a fast and furious spike upwards). As workers socked their money away, lending
institutions found out that the pockets of all of us had a great potential for going deeper. Consequently with encouragement from the government, we
had more generous loans towards housing, credit cards, and other forms of loaning. We created our own 'securitization' that could be tapped into in
a pinch. As we placed our bets on the stockmarket via 401k, it ignited other furies as well with independent investing. More investors means higher
stock prices. Here's the kicker, the big banks considered our securitization (401k's, etc) as collateral...or more specifically capital (which it
isn't really). Add to the mix predatory lending and subtle rate-inflation mortgages and the recipe for consumer economic suicide is complete.
People began defaulting on their home loans. Banks realized they trusted too much. Large investors realized these banks don't have reliable
capital. Finger-pointing, blame-game, nobody knows who's lying (whether they are or not, it's a betting game more than anything else) nor who is
reliable. Stocks plunge, searching for 'actual value'. What is 'actual value'? Well, it's that same number it was 14 years ago before America
shifted to using the 401k, before generous loans, before massive credit card balances. That number is around 4,000. Sustainable growth looks like
it'll begin around that number once again. I could be wrong, but either way, I now know that about 2 months is a good trend indicator to make a
move...if ever we're 'compelled' to trust the system again. First things first, to get our 401k contributors back, we need to have reduce
unemployment to about 4%. That's step one on the road to economic recovery.
In what places am I right and wrong? I'd like to learn more about this system and how it works mechanically.
[edit on 11-3-2009 by saint4God]