“It’s very complex, and I’ve had trouble getting a bead on how we got here.”
Yes it is, but it is not just in the USA.
The entire world is in the same boat.
One has to believe in the idea that if the USA sneezes, the world catches a cold.
Personally I don’t have a clue but to see this as a cyclical
event.
While doing some searching for something else this weekend I came across all sorts of material about the world economic situation that supports your point. Indeed this is a global situation, and since economies don’t end at the border, it may be one of those situations so complicated that economists will be debating just what the heck happened forever.
This was posted over the weekend in a thread. Item #4 put it in better perspective.
I agree under normal conditions this recession should have been cyclical, but with the amount of bogus funds running through the system they could have really broke it. That is why I think if we stop bailing things out and let the patient bleed-out we'll find the malpractice.
Right now it still seems like everyone is running around trying to literally cover their bets. I liked the ‘bucket shop’ description along with item #4 from the Abyss.
I remember thinking several years ago the problem was actually one of too much money. As if that could ever be a problem! The old faithful investments that had kept the old money families for generations were suddenly not paying enough to keep these people in manner to which they had become accustomed. As the money level went up, interest rates went down. So they started looking around for other places to put their money. One of the areas that got their attention was credit cards. Credit cards where they could demand, and get, rates that would have been usurious, if not obscene, a generation ago. But the only way to write enough of this stuff to really make money was to market the cards to people who had previously been unable to have a Master Card, Visa, etc. They had been denied bank cards in the past for the simple reason their credit history and/or income were not compatible with the standards the banks had learned from decades of experience were needed to avoid default. For the first time in history it became possible for the average person to load up on credit cards and run up $30,000 or more in balances in a very short period. All was fine for a while, especially for the people who made and sold all the neat things that were suddenly within the reach of all those credit card holders. But then reality set in and the trouble started. They could no longer make the payments, either because no one had limited the debt they were taking on, or they lost their job and the defaults started. Add to that the loads that were being taken on by home buyers, then the collapse of the home market and you have what we have now.
I know it’s a whole lot more complicated than this, and there’s a whole lot more to it than just this part. IMHO, we simply started spending money we didn’t have and couldn’t hope to repay.
Can't agree -- I fear that it's more like the Black Death. The Black Death was no doubt "cyclical" in Asia, from whence it allegedly originated. When it reached new and non-immune ground, however, it spread unchecked and with tremendous loss of life and tremendous social upheaval.
This crisis is similar, I think. The degree of globablization in the financial markets is orders of magnitude greater than in previous crises, as is the speed of the transactions. Distance and time were a form of protection back then, that are not available now.
I think the magnitude of the exposure -- hundreds of trillions of (virtual) dollars -- means we're looking at a "financial black death," a crisis on a scale we haven't seen before.
Of course, the Black Death had its positive effects, too: it's credited with kicking off both the Renaissance, and the concepts of rights and freedom that we now take for granted.
Perhaps economic reality will assert itself in a similar way.