Politics… eewww

I hardly ever have any real interest in politics, but I’ve come to realise that the economic problems of today are going to affect me and my generation greatly in the future. The problems, as I understand them, are;

1. Mortages. Home mortages kept going up and up to the point where middle class america could no longer afford to buy homes in traditional middle class neighborhoods. This created a large housing bubble.
2. Banks were forced by gov’t to give low interest loans to people with iffy credit ratings. Guess what? They didn’t get paid back.
3. Auto unions and other unions have been pushing their industries very hard for very good compensation packages; these companies raised the price of their products and began farming the labor out over seas.
4. Gov’t spent more than they were taking in for too long. Even with record tax income, the congress spent money (republicans as well as Democrats) like there was no tomorrow.

All of the above put together with many other factors of greater and lesser degree combined for a perfect storm.

Now, the housing market is collapsing. Starting with middle class america not being able to afford middle class neighborhoods then the prices started to drop the bubble burst and price drops accelerate. People wait to buy homes because prices are drropping and they want better deals. Then the home you are in no longer has positive net worth (you owe more than you can sell for) and you can no longer move. Those who have to move sell at larger and larger losses.

People with bad creidt default on loans. The banks take those homes over and sell below market price. This drives market prices even farther. Say bye-bye to the realestate market. Investment balances in real estate, a primary source of real value for banks and major corporations, goes away.

Taxes continue to increase. People have less buying power. With less buying power more companies are forced to lay people off. Less people at work, more on un-employement, more bankrupcies, more laon defaults, more debt, ….

It is a nasty cascade that seems to be accelerating. With luck it will stabilize soon.

The stated intent of Obama’s stimulus plan is to pump cash into the economy and create new jobs. If all goes well you stop the decending cascade and start the economy back up again. The problem with this is the gov’t is simply printing more money; there are no funds to back up the money being printed. This is called inflation. Pretty soon, the US dollar is going to have a severly decreased value (for ever dollars worth of gold the treasury holds, there will be 100 printed dollars… the 1:100 ratio is the reason third world countries pay 1,000 dollars for a can of soda!)

In my opinion, the entire economic system will fail. Our dollar will be useless and foreign trade will stop, and let’s face it, there are hardly any American-made products being used in our day-to-day lives. With no product (or rather a rediculous rise in the price of products), crime will shoot up. People will start stealing more and more just to survive. Neighbors will be fighting neighbors for food. The entire country will turn into a danger zone.

Or… Obama will fix everything and we all live happily ever after.