We Have planted the seeds of our destruction. Now our leaders are supplying the fertilizer

Our cheap money policy helped to fuel the boom in real estate.

People were able to buy more expensive houses than they could really afford , due to the low interest rates. This helped to stimulate demand, and pushed the price of  houses even higher.

The system began to stall, when the average house became more expensive than the average person could afford.

When rising mortgage rates in 2007 and 08 caused buyers to turn away, prices stalled, and began to slide.

The inventory of unsold houses on the market was inflated, as the sub prime mortgages ,many being Sub Prime ARM’s (SPARM’S),began to reset at much higher rates.

The subprime defaults which resulted, further depressed prices. The resulting halt to new construction and speculative renovations took down builders, suppliers, and financial institutions.

As the deflating bubble accelerated, bad debt and faulty derivatives caused banks to pull back on lending in fear of seas of red ink. This helped to create a worsening credit crunch.

The slump in construction and lending had a ripple effect on the economy.

As the Stock Market inploded, businesses cut payroll.

Banks stopped lending, and began to tighten up on customer credit. Consumer loans and credit limits on credit cards  became tighter.

Consumers stopped shopping and stayed at home to save on expensive gasoline costs.

Automobile manufacturers found themselves buried in unwanted inventory.

The world wide economy began to follow suit.  Demand for exports shrank,  and commodity prices fell along with oil and real estate values world wide.

By the end of February 09, the value of most stock markets around the globe had fallen by better than 50%.

The crash had turned into a torrent of red ink, wiping out $ trillions in assets.

In early March of 09, the percieved turn around began.

From their bottoms, stocks world wide rebounded by around 30%, and oil had once again become a speculative darling, showing increases over 50%.

The worst is over!!!

On to the next adventure.

We are all saved!!

Or Not

Part 2 later

Leave a Reply

You must be logged in to post a comment.