Boom Goes The Dynamite

Published September 29, 2008 @ 17:23 in Miscellaneous

MoneyI am not an economist. I took economics in grade 11, but that was it. I remember something about supply and demand... the rest is a little hazy.

I have been following the US government's $700 billion bank bailout plan, and I am aware the House of Representatives has voted it down. According to preliminary tallies, the Dow Jones industrial average (INDU) lost 777.68 points, surpassing the 684.81 loss on Sept. 17, 2001 - the first trading day after the September 11 attacks. Before you jump out of that window, keep in mind the 7% decline does not rank among the top 10 percentage declines.

Watching 60 Minutes last night, the $700 billion bank bailout plan looked like a done deal. Dubya and Federal Reserve Chairman Ben Bernanke praised the bill and urged Congress to pass it quickly. The House rejected the package 228-205.

If you're like me, and you've forgotten your grade 11 economics class, here's how the United States got in this mess. It's all about housing. Earlier this decade, it was much easier to get a mortgage. US home prices soared about 85% from 1996 through 2006 in inflation-adjusted dollars, creating a bubble. Then, as good bubbles do, this bubble popped. Boom goes the dynamite.

When that bubble burst, investment firms like Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch, AIG and Washington Mutual were left with staggering losses. Risky borrowers scored mega mortgages, which is all fine and dandy when you can sell your house for more than you owe, but when the bubble burst, it was all loan defaults and foreclosures.

17.44% of visitors to this site are coming from the United States of America. To those 17.44% I direct the following questions. How is this current economic crisis affecting you personally? How difficult is it to secure credit these days? Is the worst behind you, or do you believe the worst is yet to come?

4 Responses to "Boom Goes The Dynamite"

Buffalo Boy Mike
September 29, 2008 / 20:56

the worst is yet to come. The credit markets are freezing up now and it is going to be next to impossible to get credit, not only that but companys that borrow for short term things like payroll are going to find themselves having to trim workforce, more job losses and .......its a big mess that Dubya essentially caused with his parties failure to regulate these markets.

Mike from Lowville
September 30, 2008 / 08:44

Housing is just the icing. The cake is the last 35 years of neo-liberal economic/trade policies and agreements that have sent the States in a tail spin. Of course as Canadians, we want all that is American, it just takes a little longer to get here.

Chemmy
September 30, 2008 / 14:34

I'm an American, mid 20s, I graduated college without ever having a credit card or taking out a loan, and realized I should start building a credit history. I have a pretty good job and it's been hilarious getting turned down for $500 limit credit cards.

I'm trying to grow my credit responsibly, and the financial markets don't affect my work so I'm not feeling the hit yet, in a time where no one wants to give out credit.

I'll probably never be able to get a mortgage, despite always living within my means. The American Dream is dead.

Someone linked to an image you made, on my blog. If you're a Leafs fan check us out, http://www.pensionplanpuppets.com

Toronto Mike
September 30, 2008 / 14:52

Chemmy, how many authors contribute to PPP?

I appreciate the link. We're all in the same gang we Leafs fans and we've gotta stick together. I created that "Use the Force, Luke" image right after we drafted him.

http://www.mikeboon.com/2008/06/luke_schenn_a_maple_leaf.html

And if you're wondering why I don't comment over at PPP, it's because "You must SIGN UP for an account to participate."

And I'm busy over here creating Luke Schenn photoshopery.

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