why exactly is the US economy in trouble and soon turning into recession?
i've heard it is partly due to housing markets and ppl cannot pay off their credit card debts and stuff like that.
but i can never seem to get the "general picture" of why the US economy is doing so bad.
is it suppose to be complicated, or can it be described in a brief summary?

also, what type of jobs are at risk? does it mean that it will be harder for new graduates to get jobs?

btw i posted in this section since i thought more ppl in this age group would be more aware of this situation.

The subprime mortgages affected almost everything. It changed the way banks lend to each other, to others, and made the fed cut the interest rate. Its not that they can't pay off their credit card debts(this is an American thing actually thats existed for decades). Its where people got huge loans for houses that were, apparently deceiving, and people ended up not being able to pay the interest rates as they rose. While it is one of the larger drivers, there are multiple effects that have spawned out of it(which can actually be mistakely attributed to the cause).

The Fed is considering buying shareholder equity from some banks so they have free cash to play with and get out of their own slumps. Its like helping a child get on its own feet again for doing something idiotic, helping them, and then not teaching them anything so they do it again.

^ Dude, you're better at explaining than my econ professor is. thank youuu

for the first question, i had always believed that china has something to do with it. Well, to further explain, the us currency is NOT good now. It was high before the war and now, its lowered. other countries don't really trust us dollars as much because of the declining rates. they resort to gold instead. China currenly owns most of companys?<-- im not so sure about this but thats what i've heard. it makes sense though.

I don't really trust banks at the moment. But, now, for the second question: job wise. Don't sweat. Throughout history there has been up and downs. Still, people have jobs sooner or later. The only jobs now that are most promising and i suppose guarenteed are healthcare jobs. the rest should be good but i'm not so sure. people are still living like nothings happening and i believe thats becasue of propaganda that everything is ok. No one wants to doubt their own country. or maybe its because the media diverted most of our attention to other things than real news.

Greed has caused the economic downturn. Banks didn't know what they were doing when they were re-packaging CDOs with risky subprime mortgages and the monolines were ultra greedy when they were insuring this stuff with triple A ratings. Everything is just a spill over from the CDO mess.

The low value of the dollar isn't the cause of the slow economy. The CDO mess caused the credit crunch making the Fed lower interest rates causing the dollar to be devalued, tanking the financials and everyone is jumping ship to commodities causing inflation.

The job market is actually good for college graduates. You have the demographics in your favor.

I don't think you can diagnose our economy with just the housing market. It leads to other markets falling but we have a lot different markets in our CPI. And our housing market doesn't have any correlation with our unemployment rate also.



I don't necessarily think the US dollars going down is a bad thing. I think it would help stabilize our economy. The less the dollars cost the more tourists we get and more the US imports rise. As for banks, you should be able trust it because of FDIC unless your really rich.

And for China are you talking about our debt? I know for sure we owe china the most. And if they were going to collect it we would be in major trouble. That's why we stopped bothering china about human rights and started to suck up to them.

probably is not the only reason but it is definitely the most substantial factor that caused this mess.

the housing collapse signals the fact that people do not have money. take a look at the towns of Stockton, CA and Detroit, MI where you'll see miles and miles of houses foreclosed because families couldn't pay off their loans. if we see it on the news that people are under hard times, it affects how people spend money, companies to hire employees, investor confidence, etc.

sidenote all of my stocks beat analyst expectations and i took a beating because of economic and recession concerns.

There's a lot of blame to go around.

One problem I'd like to add is the consumer. As a group, we have spent our way into a lot of the problems we now face. The average consumer has negative savings, meaning they have spent more money than they actually have. I have read (but I'm not positive) that the average American carries about $10,000 on credit cards. That is insane!

A lot of people bought houses that they really couldn't afford. No money down and low interest rates for the first couple of years. Then the payments go up to a "reset" amount that the borrower should have realized would be too much to handle. But hey! why worry about it when all your thinking about is that big house you really really want?

Our economy has been driven by consumer spending and we sure made it go go go. However, we're all spent out, and now we can't afford to keep it going because we didn't bother to save. It's going to take some time for our earnings to catch up to our spending habits.

I didn't actually- I was just answering the OP's question briefly. I was hoping someone like you would expand on the overall economic scale.

And what are we doing now? We're lowering interest rates to increase more consumer spending. I think I smell INFLATION.




The thing I feel thats bringing our economy down is not just the housing market but the fear of recession the media is portraying. Even couple months ago companies were posting record profits till the media and everyone else started talking about another "great depression" and recession. And than that's what I think affected our economy. Honestly, I don't think our economy in too much of a trouble if it wasn't for the hype.

Btw this is just my opinion and you can correct me if I'm wrong in anything. I'm still learning about the economy and want to learn more about it.

http://www.atimes.com/atimes/Global_Economy/JC01Dj04.html
Mouth-to-mouth will fail economies

The US government might yet pull the economy out of the jaws of recession through the short-term fix of raising spending on the military or the related disaster capitalism complex. But one way or another, the forces making for long-term global stagnation are now too heavy to be shaken off by the equivalent of mouth-to-mouth resuscitation. - Walden Bello

http://www.financialweek.com/apps/pbcs.dll...8/REG/346385380

NYU professor predicting a whale of a bear market
Legendary bear Nouriel Roubini lays out the case for a global financial meltdown. Pass the Prozac, please.

By Nouriel Roubini
February 28, 2008

Oil, Oil, Oil drive everything to stop

one word may sum up anything that anyone has said

BUSH

just asking on a very practical level... but where's my extra spending cash as a result of these interest rate drops?

also, i think we are in somewhat of a recession. we created value out of thin air via housing boom, but all that really did was create debt. people never had the money, but now this magical sum has become binded to obligation. and therefore, money is now short, and everything is readjusting towards the south.

the investors who put their millions at stake should take the loss. the government should not bail out the corporations for doing something stupid. there should be bigger penalties to prevent people from walking away from their debt [house]. i hope my tax dollars actually do something more than get used for quick fixes that might patch up the economy's leaks with bandages but let the bigger issue slide under the rug.

and on top of that.... BLEH to the re-adjusting wave of ARM's headed our way in 09... this aint the end of it, and it might not look any prettier for a while

^ you don't get any extra spending cash with interest rates dropping. However, it helps makes things more tempting to borrow and buy.

this is kind of a surface level statement, because most of the investors are huge banks that have significant influence over the economy. the government simply can't afford for a major bank to bust. also the credit crunch is not necessarily the fault of these banks, but rather the loan orginators who were too eager to lend money as well as the borrowers who took on debt they couldn't afford. these mortgages get securitized and then get bought by big banks

also, your tax dollars are most likely going toward the iraq war, the recently proposed bailout is nothing compared to military spending..

i'm telling you guys

it's BUSH!!! BUSH!!! BUSH!!!

yay!!!

sorry... i'm in that loopy zone right now...

^ Honestly, I don't think it's Bush's fault that the economy is like this. His presidency was just in the bad cycle of the economy. Sorry about the cliche but whatever goes up has to come down.

maybe your right...
we may have bombed iraq sooner or later and the gas prices would have still rose

what's done is done

HAHA!!!

Funny how people make things up to try and make them sound professional!

Some are spot on, but oh my god, how much can some make up such ludicrous and false info based on their ill-perceived judgement call??

Good for a laugh though! Keep trying guys!!



LOL! Blame everything on the ugliest and idiotic person available! Good old Bush must be one of the biggest mistake and disappointment in the history of mankind!

But drama is right, the government cannot control the economy. Those who argue that Bush is doing this and that with the interest rate should go back to school.

Fact 1: the government do not have control over how much, and what on, people should spend.
Fact 2: the government do not have control over the countries' central bank, e.g. Federal Reserve Bank. Bernanke does not take orders from Bush.

I don't know if you guys read the news last week. But bush rejected a 2nd stimulus package and will be rejecting measures for now. Why? "I don't think we're headed to recession. But no question, we're in a slowdown." - BUSH

Following his news conference, Bush traveled to the Labor Department to meet with his economic advisers.
Afterward, he expressed confidence in the nation's ability to weather the economic downturn. - Ron Edmonds|AP

This doesn't mean we can't get to Recession. I'm just saying right now we aren't in or are terribly close to recession.

i don't think any one knows the root of the problem.

i'm sorry but you cannot say Bush has nothing to do with it at all
he did do his part of helping the economy by being the way it is now

So what's your take on President Bush?



Yes, the Federal Government does have it's role, other wise it would be Laissez Faire, and we wouldn't have the "Full Employment and Balanced Growth Act".

I think what Emminency was trying to say is that, you can't necessarily judge the President right now with how our economy is. Why? Because it's proven that our economy has it's ups and downs. If the economy is going into a recession and the president didn't do anything or made things worse than it would be a different story.

a lot of the problems we have now were in place before bush arrived, but his policies made them worse. our social security is still underfunded, we have no health-care system, and now we're in even more debt due to the war. meanwhile, he gives tax breaks

^ well the reason why he gave tax breaks was to "stimulate the economy" since a lot of Economists are crying out recession this and that.

We do have a health care system but it's not as good as Canada.
However, I do agree with you on his policies.

You're doing an admiral job of providing answers addicted2kdrama, but unfortunately, it's a no-win endeavor. There are people who simply hate President Bush, and take enormous pleasure in blaming everything on him. Attempting to have a meaningful and informed discussion on those terms is futile.

Here's my intake on why there is so much volatility in the U.S. economy since Mr. Bernanke took office.

1.) The financial innovations that were allowed after the Glass Steagal Act was repealed. This act created a wall between investment companies and commercial banks. It also created a wall between commercial firms and commercial banks. So you can understand what the impact on the financial market was after these walls were broken, by the Gramm-Leach Bliley Act. 2) The fact that Mr. Greenspan, ex Fed chairman, kept the interest rates too low during his tenure as chairman of the Federal Reserve Bank. 3) Housing Centric Economy. households and consumers obviously put a substantial portion of their wealth in houses. In addition, the fact that homeowners have been more speculative and more risk-oriented, meaning that they gamble with purchasing a 2nd home, and believing that the value will go up to a level where they will earn some profit. 4) The crisis in the Financial Market: There is obviously a strong link between the financial market and the goods sector so you can understand that a shock from either markets/sectors will affect the other drastically. This is tied to the financial innovations; securitisations of mortgage-backed securities and selling it off the wall-street firms. I will post up an article later, explaining it in more detail.

yes

The Dow is hitting it up... I wonder what industry will skyrocket.

dows gonna readjust... it's all smoke and mirrors man... you can create credit out of thin air, but the debt it leaves behind can't disappear so easily...

Trust me a few industries will boom... The question is which? It's not going to be tech tho.

Maybe latex, since what is it 1 in 4 teens have STD's according to some study lol?

george bush...that's why -___-
its really blatant.
war= trillions and trillions of dollars
drug illegalization (sp)- dont no if u realize..but resisting the flow of drugs around the US..costs hell of a lot of money
also..not just the iraq war..but, the US fights in small wars in undeveloped countries.
all the natural disasters.
prisoners
people around the world always think AMERICA as the land of dreams. but really
the country really has a lot of issues..

INTRUDER ALERT!!!!!!!!

Don't post here until you turn 20!

A lil info for you.

Bush can't go to war unless Congress agrees with it. And guess what you vote for the people in it, directly.
So you want drugs to be legalized??? Do you know what problems that will cause?
US does not really fight in small wars they support a specific side for a specific cause.
Bush is not mother nature.
prisoners???
This country does have issues but what country doesn't? No country is perfect.
For the millionth time don't blame the president for the Economy.

what kind of problems? ;o

^ how about more cracked out/dead people sleeping in front of your door. LOL

I'm sure you can think of some w/o me telling you.

people do drugs anyways even if they are illegal
wouldn't really know if things would go all crazy if they legalized drugs.
i'm sure people can practice some self restraint
i mean, we all know drugs = bad for you
i thought you had something else in mind when you said it'd cause problems so i thought i'd ask. ;p

How about cigs? Everyone knows it's bad for your lungs but everyone still does it. And it can become a fad also. The cons just outweigh the pros if you do see any.

We would have more imports than exports because the South American countries sell it for dirt cheap already. You'd see a surplus of people having medical problems which can lead to alot of things like crowding the ER, more gov. programs, and etc. More driving under the influence which would also lead to more accidents/deaths, kids being able to get it easily than it is already, a lot more border hoppers. I would say crime but it's kinda iffy.

Lets just say that if the US faces an economic collapse, then the whole world will be in very big trouble.

but that wouldn't happen... Your too pessimistic.

legalizing drugs might boost the economy slightly. The government can collect taxes on drugs sold.

taxes aren't part of the economy, it'll help on paying off debt and on gov. programs.

Because most ppl will take a yard when given an inch, and also exploit/take advantage of the system when opportunities allow, driven by greed. This greed is intensified by mindless media stimulants so protected by our first amendment.

From the poor to the rich, from welfare to the fed bailing out major financial institutions. Where is the accountability?!

Ppl in power abuses their power, take risk on other's behalf, for personal gain. Most of the time they get a slap on the wrist, and "forced" to resign with millions in their bank account for a comfortable retirement.

Our education system is overtaken by MTV and crap in the media. Most ppl know who Paris Hilton is, but not any of the presidential candidates.

Where is the pride in "made in america"? A lot of our manufacturing are outsourced. Things build in America are seemingly inferior in quality. Look at the car industry. What Detroit had build is taken over by the Japanese.

As long as there are weak and simple minded ppl in the country, they'll continued to be preyed on by those with some power who abuse the system. It's a perpectual cycle.

Case in point, un-educated person seeking a mortgage, being told by mortgage broker they'll get a very low monthly payment, which the broker is set to earn commission from the deal. Another person underwriting the deal then sells it to a bank, then to some fund manager. Everyone benefited in this chain, except some key details were omitted to be told to the borrower, or he/she was too ignorant to know/ask.

So here we are now, trying to dig ourselves out of a hole.

IMO, we're too loose on our check and balances, and we try to accomodate everyone for the sake of politics and getting votes. We need leaders with a set of you know what to lay down the hardline, and punish those who do take advantage. There's no shame in cutting your loses, and focusing on what's still good, rather than bailing out the bad seeds.

We're not fine. As some thought Bear's arrogance led to its demise, I too see American's arrogance + greed leading to the same.

It's not one person's fault. It's all our problem. We need to do our part in educating our youths in the importance of value, work ethics, honor and pride. Show them there's a pot of gold at the end of the rainbow without havign to take shortcuts or cheat the system.

^ what he said...

plus can bush...

Um, the investors did take the loss. Bear Stearns being sold at $2/share is a massive hit for the investors. To put things in perspective, Bear has over $10 trillion dollars in outstanding derivative positions. Nobody, and I mean nobody, wants to see them collapse. Yeah, you may say the FED bailed out the BEAR, but in doing so they saved the system.

I'm a supply sider myself so I believe tax policy is a huge part of the economic growth. Lower income taxes, capital gains, dividends, corporate taxes...all mean higher consumption and higher salaries. Of course I would change my position if I got laid off or retire, then I would be a demand sider...more taxes on the rich, more government programs, etc.


10 trillion is a staggering number, I can't believe how much leveraged these banks are. I've never witnessed a run on a bank in real time, scary stuff. Hope it's over.

I'm not saying tax policy isn't part of economic growth. I was trying to point out the taxes the government gets from selling drugs, if legalized wouldn't go towards the economy. It would go towards paying off the war, our debt, and more government programs.

And as for more taxes on the rich, I'm against it. I'm also against putting more money into make gov. programs unless it's a better government program for education and healthcare. It just doesn't make sense to tax people of the upper class because they make a lot more money. The upperclass already pay more taxes dollar wise the the middle and lower class combined and they are what less than 10% of the population?

Sorry, took it out of context. If they were to legalize drugs, I would buy the drug commodities(cocoa, poppies, etc) ETF and short the healthcare industry.