Thread: What caused the recession?

Originally Posted by gugi

It's true but you forgot the examples that are not favorable to US. Counting who's broke and who isn't is better measured by something like say the ratio of external debt/GDP. US owes 1 year worth (same as Italy), Canada 7 months, Russia 4 months, China less than a month.

I agree with you and it is not till the last couple of decades that the US had such high debt ratios and I don't agree with it.

Originally Posted by gugi

I read in the news that a week or two ago, part of US decided to let young people go without operations, because there was no money.

I will agree with you about people not getting health care when they need it but I can tell you that it is very much an exception in the US. If you go to an emergency room, by law, you must be treated. I agree with you that the health care system need fixing. Almost everyone here agrees with that.

Originally Posted by gugi

As I posted earlier the relevant numbers are per-capita. Then there's the question of whether you can just call GNP goods, or if it's a good measure of useful stuff. For example Qatar and Luxemburg have almost twice the GDP per capita of US, but I'm not so sure that by itself is meaningful. Luxemburg, for example, has external debt worth 40 years.

I agree that on average the US workers work longer, but that doesn't translate into a resulting better quality of life. The thing is that when you strip the political hot buttons and ask questions about the substance of things only, the answers people give are very different. The free market is nice as pure ideological concept, but just as socialism, when put to practice most people don't really like the results.

Concerning GNP there are only 5 counties that produce more than the average US worker but thank you for pointing that out.

The thing is that I have a choice how much I work and that is how I define "quality of life". You may be right about the free market system being hard. Just because one can decide to simplify one life doesn't mean that is the life style that I want. I could just gather berries from sun-up to sundown. I personally don't find that much to my liking. I realize there must be balance but, on the other end if I decide to work very hard why should someone else be entitled to more of the fruits of my labor than someone who chooses to work far less.

When I was younger I worked in construction from 7am to 4pm at which time I would go to college till 10 pm at night, 4 days a week then study till 2am. I would get up at 5am and do it again. During the weekend I would study an average of 20 hours....I did this for over 5 years. The hard word paid off in the end but there were many that said I was "stupid" for putting myself though it. I earn a very good living but the sense of entitlement that surrounds me is sometimes very dis-heartening.

Thanks for you perspective.


Take Care,
Richard

A primary cause of the Great Recession was electing brain dead politicians to positions of power (aka: former U. S. Senate Banking Committee Chairman Phil Gramm), who sponsored and passed "brilliant" legislation for complete government non-interference/regulation in the U.S. financial markets. Influenced peddled/lobbied/supported of course by large U.S. financial concerns. Ha, politician/lobbyist influence pedaling, who'd a thunk it!

Under his chairmanship, legislation was passed that eliminated any government oversight of the complex derivatives market, which ultimately led to the American taxpayer bailing out AIG to the tune of nearly a trillion dollars. After his senatorship, he of course became a highly paid corporate lobbyist for a large U. S. financial corporation that benefited extensively from from the bills and legislation that he sponsored and passed. Imagine that!

Idiotic legislation was passed that allowed mortgages to be broken into shares and packaged and sold as securities by loan originators to buyers around the world, with no governmental oversight/regulation. I am not a big fan of government regulation/oversight, but in financial matters it's an important check to human greed. Corrupt mortgage loan originators (who now had the luxury of not having to hold the mortgage note to maturity) did not properly vett mortgagees. Anyone with gray matter could predict that this was a perfect recipe for corruption and fraud, and sure enough, rife with greed "mortgage mills" sprang up like weeds, and wrote billions of dollars of fraudulent mortgages, securitized them, and sold them to unwitting investors around the world. This led to a mortgage "bubble", and when the inevitable loan defaults occurred, the bubble burst and there was a near collapse of the world economy resulting in the unfortunate and unnecessary Great World Recession we are now in. They collected the fat commission checks, and the American taxpayer picked up the bailout tab!

To add insult to injury many of the crooks who wrote the fraudulent mortgages that they knew would eventually fail, added to their corrupt/obscene profits by purchasing derivatives bets that they would fail. Is it just me who wonders why so many of the crooks responsible for this mess have thus far avoided prosecution?

It is fact that when a private citizen spends more than they can afford, they get into trouble. When government spends more than they can afford, they print money and borrow even more. They continue to live above their means and hurt the people who pay their salaries.
Investors, small buisness and entrepeneurs will rise again when the perception of these problems change. The sooner, the better.

It is only a small part of a very complex problem, but localy, these ideas do work when people believe in themselves and they are free to be productive. In other localities, where hope and self worth are in short supply, there will always be a recession. That really is one of the main points of why we who live in America are here as far as I know.

"Government is not the solution, it is the problem"

Originally Posted by TopCat

A primary cause of the Great Recession was electing brain dead politicians to positions of power (aka: former U. S. Senate Banking Committee Chairman Phil Gramm), who sponsored and passed "brilliant" legislation for complete govermnent non-interference/regulation in the U.S. financial markets. Influenced peddled/lobbied/supported of course by large U.S. financial concerns. Ha, politician/lobbyist influence pedalling, who'd a thunk it!

Under his chairmanship, legislation was passed that eliminated any government oversight of the complex derivatives market, which ultimately led to the American taxpayer bailing out AIG to the tune of nearly a trillion dollars. After his senatorship, he of course became a highly paid corporate lobbyist for a large U. S. financial corporation that benefitted extensively from from his bills and legislation that he sponsored and passed. Imagine that!

Idiotic legislation was passed that allowed mortgages to be broken into shares and packaged and sold as securities by loan originators to buyers around the world, with no governmental oversight/regulation. I am not a big fan of government regulation/oversight, but in financial matters it's an important check to human greed. Corrupt mortgage loan originators (who now had the luxury of not having to hold the mortgage note to maturity), did not properly vett loanees. These rife with greed "mortgage mills" sprang up like weeds, and wrote billions of dollars of fraudulent mortgages. This led to a mortgage "bubble", and when the inevitable loan defaults occurred, there was a near collapse of the world economy, and the resulting unfortunate and unnecessary Great World Recession we are all now in. They collected the fat commission checks, and the American taxpayer picked up the ultimate tab!

To add insult to injury many of the crooks who wrote the fraudulent mortgages that they knew would eventually fail, added to their corrupt/obscene profits by purchasing derivatives bets that they would fail. Is it just me who wonders why so few of the crooks responsible for this mess have thus far avoided prosecution?

Telling it like it is! You're on the money TopCat. Let's not forget that the same Phil Graham was John McCain's economic advisor when McCain was running for president.

Originally Posted by TopCat

To add insult to injury many of the crooks who wrote the fraudulent mortgages that they knew would eventually fail, added to their corrupt/obscene profits by purchasing derivatives bets that they would fail. Is it just me who wonders why so few of the crooks responsible for this mess have thus far avoided prosecution?

I think the reason some of them have escaped prosecution is because they are now employed by the treasury department.

All flippancy aside, it really is simple: the cause of the recession is two consecutive quarters of negative GDP growth. In other words, a country is in recession because economists defined it that way. The same economists who, as a group, failed to see the GFC coming or, if they did, failed to tell anyone about it (with a couple of notable exceptions). Really, anyone who thinks "economics" is a science should take a long hard look at recent events.

If you build your "wealth", individually or as a nation, on a house of cards, just one card being pulled out will bring the whole thing down. The Emperor eventually realises his new clothes aren't actually there...

How much of Western capitalist society's wealth is "on paper", or "in theory"? A lot. Too much in my opinion. We, as individuals, have been captivated by financial sophistry, our own greed, and lulled into a false sense of security by the increased levels of "nanny state" government that we, as citizens of democratic societies, have demanded. Face the facts - in a democracy, if you blame the government you are basically blaming yourself.

So when you say what caused the recession, I ask why did it not happen sooner. The iceberg hit the titanic years ago, and we've been stuffing the hole with bubble gum for so long we started thinking it was normal.

James.

We always need someone to blame. We blame politicians yet forget that in a democracy it's 'us' that elected them. You get the government you deserve.
Most of our problems are caused by greed and huge numbers of us don't use good judgement when it comes to managing our finances. We blame the bankers, but maybe we should have looked harder and questioned what they were selling us.
We don't appear to learn any lessons from history and thus are doomed to repeat the same mistakes.

Originally Posted by riooso

I will agree with you about people not getting health care when they need it but I can tell you that it is very much an exception in the US. If you go to an emergency room, by law, you must be treated.

Nope. Enough Americans have informed me that this is not true. By law they are required not to let you die. If they can wrap a band aid around you and send you off, that is what they do. No treatment and no meds.
If they can stabilize you until you die form whatever it is you're having, then that is fine too.

But that is not going to do you any good either, because you'll still be left with a bill that has ruined you financially.

Originally Posted by riooso

The thing is that I have a choice how much I work and that is how I define "quality of life". You may be right about the free market system being hard. Just because one can decide to simplify one life doesn't mean that is the life style that I want. I could just gather berries from sun-up to sundown. I personally don't find that much to my liking. I realize there must be balance but, on the other end if I decide to work very hard why should someone else be entitled to more of the fruits of my labor than someone who chooses to work far less.

When I was younger I worked in construction from 7am to 4pm at which time I would go to college till 10 pm at night, 4 days a week then study till 2am. I would get up at 5am and do it again. During the weekend I would study an average of 20 hours....I did this for over 5 years. The hard word paid off in the end but there were many that said I was "stupid" for putting myself though it. I earn a very good living but the sense of entitlement that surrounds me is sometimes very dis-heartening.

Thanks for you perspective.


Take Care,
Richard

Your money is only worth something if there is a stable society to spend it in.
Even if you don't care about not letting other people live in the streets because they lost their job and their insurance, that fact alone should be worth something. I once heard George Carlin say this: America is a country where the rich are using the poor to scare the middle class into working their ass off.

Now, I readily admit that we have our own problems. That goes without saying.
And so does the US.

The U.S is a country where, in previous decades the powers to be were smart and realized as long as the average working stiff could afford to buy a home, drive around in a late model car, send his kids to college and take a vacation each year he was happy and content and couldn't care less what some fat cat made.

Those smart people are gone now and the fat cats are sucking up the wealth. As the middle class crumbles the average guy is starting to become much more concerned about those fat cats now. Things will continue to deteriorate to a point.

At that point is where it all unravels.

Just for the information of those who mentioned that it is the law that if you go to the emergency room you must be treated ..... stabilized is what it is. If you don't have insurance they will get rid of you as quickly as they can. I personally know people who were in this situation and one of them died because of the "treatment"..... rather the lack of it, received through hospitals in Palm Beach county.