Let's have a serious discussion here. No need to advance our individual beliefs (myself included), but an honest discussion on how this financial crisis started; and more importantly, what we are doing to fix it. At some point we'll come to some consensus I'm sure if what we're doing even makes sense. So I pose this question to all you P&R'ers out there, what caused this crisis? and.. Is Obama and Congress making the appropriate moves to fix it?
Actually the cycle of boom and bust is natural - it is interference with that cycle that causes our 'depressions'. Bad assets must be liquidated, not salvaged or saved or extended. They are a cancer of money loss, and must be left to die, as any cancer should be. One of the major causes is our currency system, based on trust and backed by none. Another is the governments role in the Fed, and also giving lines of credit to those who would snort it up like coke. No credit should be allowed. Finally if you look at how we used war in the past decade to spur economic growth you will see that it has become more of an expense than an income generator. At least when the Romans attacked someplace, they did it for something in return, be it gold, resources, or what-have-you.
The cycle is natural, but the way in which the cycle is handled makes a big different. If this recession was only a cyclical one, there wouldn't have been a need for any bailout package. IMO, 3 factors made this recession an exceptionally bad recession (some may even call it a depression). - excess leverage in the financial system, which was added by lax accounting standards. - extremely poor risk management by the institutions. - complete failure of the regulatory framework. The problem is that the damage has already been done. There is no quick solution now. Bailing out the institutions is bad, but then these also can't be allowed to fail. Banks are essential to keep the economy running. If allowed to fail, all major banks in the US would collapse; leaving a vacuum in the economy and a situation like the "Great Depression". Another alternative can be that the US government should allow the institutions to fail, but instead start its own banks to keep the economy going. These banks would provide credit and banking services to running businesses and make sure banking collapse doesn't create a domino-effect in the economy. These banks can be later sold-off whenever the economy stabilizes.
i am coming from kerala state where is world first parliamentarian communist government was at 1957, but sad thinks is kerala is part of india witch is big capitalist country in this world with lot of corruptions, btw now a days kerala communists dont know who is "karl marx".. lol i saw a video clip that giving better information about financial crisis , take a look http://www.youtube.com/watch?v=Q0zEXdDO5JU
It's funny no one wants to mention the most obvious cause... WAR!!!! Not just one but two (Afghanistan and Iran). When you waste that much money over 5 years, it always takes a toll.
Oh yeah, the miguided homegrown socialism is what still plagues us today, including our home grown communist party and its supporters. And if you donot like the "capitalist" indian state, move to cuba or china. See if you have the freedom there to criticise the country. LOL Once in china, you will be pining for the "bad capitalist" India and posting threads like this : http://forums.digitalpoint.com/showthread.php?t=1246374 If communist is the answer to everything, why dont we see it thriving all over the world. Show me one single country that is working well under communism and socialism. Yes thats right, there are none. Because the entire theory is flawed.
First of all, we are not at war with Iran. Second of all, war throughout US history has been good for our economy. There is very little relationship between the current economic crisis and the fact that the US is spending more on military actions around the world.
Here, i'll sum it up: The retards in California, Arizona, Michigan, and Florida bought a house for $300,000 in 2000. In 2002, their house was now worth $330K. They took out an equity loan (2nd mortgage) on their home for $30K. In 2005, their house was now worth $360K. They took out more money on the equity of the home. This continued to happen until they owed about $450K on that home that since the housing bubble crapped out is now worth about $300K again.
This crisis is one of a kind in American History. 1) Because of Size 2) Stupidity behind Securitization. Securitization only works if people in the bottom hold up. Just like all the other pyramid schemes. I don't see anything getting better even with bailout after bailout. Bankers have leveraged many many trillion dollars on securitization. Even single digit trillion dollar bailout won't help. We may need to look at bailout at Milli or Centi Trillion range. Look at AIG with 60 billion lose. Magnitude going to get worse.
You forgot an essential ingredient: The banks turned around and used the debt they were owed of $450,000 as "capital" to make leveraged investments in everything from equities to commodities to derivative contracts of the above. IE: The $450k debt was treated by the banks' accountants, financial managers, and hedge funds as $9 - $18 million in capital. (20 or 40x leverage)
completely i agree with you, but china or cuba is not real communist country just they are saying "we are communist" but NOT. now in our state ( kerala ) have communist government but i know they are worse than any other capitalist party in India ... but in the real meaning "Communism is great" 8 hour for work, 8 hour for entertainment, 8 hour for sleeping there is no monopoly everything is "copy left" open source linux no competition for bad money .. no rich no poor then why there is no real communism in this world ? yes there have lot of reasons, approximate 10000 years back we humans started life with agriculture that was "old age communism" then we reach at "feudalism" then "capitalism" again we are going to reach that "new age communism" ... it will take time, we have to allow full growth of capitalism to completely collapse. then only we can create good communist life style... there is no economical collapse.
Are you kidding, there was no communism 10,000 years ago, people had property rights. Man by nature is territorial, like many other mammals, we protect our territory and property. Even a dog in china or cuba will bark at you if you trespass its territory Communism as a theory is a failure since it negates or neglects the basic human traits of ego, belonging and incentives. About monopoly, there is of course a monopoly in communism, it is called the state, which owns everything. Communism is a failure since it celebrates mediocrity, has no accountability no sense of owning, stifles creativity, tries to screw market dynamics and doesn't reward performers. You don't have any incentive to perform well than the others. It kills individuality and kills the individual. The genocides under various communist governments is a testimony to the fact. I understand in a perfect world, perfect communism might work, but than we are living in a world which is far less than perfect and we humans are not gods either. And who is to say that perfect capitalism in a perfect world wont work ? In an imperfect world such as ours, capitalism and market driven economics are working better compared to communism. Capitalism recognises the individual and provides incentives to perform well. As for, "8 hours of work, 8 hours of sleeping 8 hours of entertainment", you can do better in capitalism and still have your freedom, you just have to perform well.