posted on Oct, 30 2009 @ 04:15 AM
It's not *just* predatory lending practices. You couldn't do that without willing victims. The US has a culture of get it now and pay it off
later, which is dangerous. Most of our economy was based on future payments of debts. That's imaginary money.
What often happens is that some lender who has lots of loans out (people owing them money) then tries to borrow money for its own business. It uses
its outstanding loans as "collateral". We've got tons of money, all those people are going to pay off their loans, we'll have plenty of money to
pay you back. So they get the loan. And so on. If all goes well, the people pay their loans back, the lender pays its loans back, and everyone
lives happily ever after.
Unfortunately, in life, seldom does all go well. There are always snags and unforeseen problems, unexpected job losses, unexpected expenses, and so
on. When lots of people can't pay back their loans, the lenders get into trouble. Then they can't pay back *their* loans, and the companies that
lent the lenders the money can't pay back *their* loans, and so on. Everyone's waiting to get paid back for money they lent out, but no one has any
money, so we're all screwed.
To compound matters, we've got a complex and fictitious system of stocks, bonds, and other such transactions. You buy a stock, hope it goes up, and
if it does, great. Sell, get out, and take your money. Individuals can become quite wealthy doing that. Unfortunately, many, many people are using
the stock market as a sort of "retirement fund", hoping that the money they invest will grow more quickly than it would in a safer instrument.
That's great. It usually does. People invest in X fund. They tell their friends that the value of the stock went up, so others invest, which
drives the price up even further. Great! Everyone's rich!! When many people all buy a stock within a short time, the price tends to go up.
Except, what's going to happen is, everyone's going to retire and try to cash out their money within a short period of time. When many people try
to sell their stock within a short time, the price plummets. Again, the large amount of money that seems to exist in the stock market is imaginary.
It's fine on paper, but when everyone wants to cash in, the value drops and suddenly it's almost worthless. That's mainly because the value was
always imaginary, not based on the actual worth of a product or service, but on the eagerness of others to buy it.
Don't blame the Internet for the meltdown. It's greedy people trying to get something for nothing, and being sadly disappointed when it doesn't
happen. A few get rich. The rest wind up giving those people their retirement funds.