reply to post by Logarock
You got that right! It is pointless pointing the finger. A lot of people seem so misinformed on this issue. It is caused by several. highly related
causes. It isn't caused by one huge thing and if you think that's the case then you're shooting yourself in the foot. It's NOT the companies.
It's NOT the illegal immigrants. The COMPANIES provide you with jobs. The ILLEGAL IMMIGRANTS are a source of cheap labor. They're willing to work in
those fields on those hot summer days for a LOT less than you will. They keep costs low so you can buy goods cheaply.
1) High oil prices
Remember how gas was going up, up, and up? It has come back down now but the damage really has been done. During this time prices for goods had a
little lag time before they could catch up. Gas is down now, sure, but companies need to recoup all the losses so don't expect food prices to go down
anytime soon. Since this country depends so much on oil for transportation, consumers could take the hit but only for a certain amount of time. People
are driving less, you still notice that there is an energy efficiency craze now. People aren't driving as much as they used to even though gas was
going down. This is just a small factor in the crisis. It did lead to high food pricesfinally during the summer of 08, keep that in mind.
2) Mortgage crisis + Housing bubble.
A lot of people who had bad credit were issued loans, called subprime loans. These loans generally have a higher interest rate and can get downright
nasty if they weren't reading the terms carefully. I think a lot of people ended up taking variable loans and in some cases people were to the point
where they were just paying the interest rate and not the loan itself. At this point, the interest rates still kept going up for some people so you
have people defaulting on their loans and for others, they were having a tough time paying bills and food so for some it was that they couldn't
afford to pay for everything anymore. This causes a foreclosure to occur, so since the person/family can't pay the loans, the issuer of the loan
takes up the property. Kinda like getting your car repossessed if you don't pay off the car loan. Which leads us to... the housing bubble.
A lot of people kept buying up homes in the anticipation that housing values would only keep going up. Well, the reality is that what goes up must
come down in certain cases like these. You have people's homes being foreclosed. Remember that good old supply and demand graph. If there are lot of
properties up for grabs then the value of the land generally goes down. In theory if you have a lot of homes for sale the land is generally
undeseriable and hence declines in value. And as you can imagine, the banks who loaned people more money than the property is worth now is in quite a
Something everyone's not too excited about. The banks are partially as much as to blame as the people who took out the loans. However, a lot of this
economy was built on the banks lending a lot of bad loans so you really can't point the finger at them. The people are just as guilty as the banks,
after all the people also could have said no to the bad terms right?
The banks went happy go lucky with the loans and when the whole energy crisis hit and people couldn't start paying off their loans, well it really
stacked up on each other to the point where a lot of people couldn't handle the payments. You have banks issuing more money than they had and that
causes a big problem when the time came for them to repay money they didn't have.
So now you have people who don't have homes. People who are still having to deal with paying a lot more for food and other goods/services. People who
don't want to drive. People who don't know where we are at in the recession. This drives people to save their money. Saving money means less
consumer spending thus companies are now scrambling and you will see that now they aren't hiring as often as they used to. They are now laying off
more people and finding ways to save money themselves because people aren't spending. This is something you really can't control though, I'm not
pointing the blame at the people here although it seems like it. Far from it.
I think these three factors. High Oil, Housing Bubble/Subprime Crisis, and bad lending eventually led to this economy that we have now. I hope that
was pretty thorough.