Tuesday, December 21, 2010

My Thoughts on the Cause of the U.S. Recession

Welcome to Tuesday’s blog entry from me folks! Today’s topic will be about my opinions surrounding the various financial crisises in the U.S. or in short, the U.S. recession. Just as a disclaimer, your mileage may vary on these opinions. You may agree or disagree, and there might be a better way to look at this. I’ll only cover a minute section of this major world issue, although more articles examining this topic shall come in the future. But without further to do, let us delve on this controversial subject.

As we all know these days, the financial health of the U.S. is in crisis – as is the rest of the world’s credit. The world can be considered at peril if some actions take drastic actions to secure their money back – which could lead to wars and genocide and the like. But before that, let’s go back a few years and see the cause of this giant mess. In the olden days, people used to very rarely borrow, mostly relying on cash at hand for buying or trading goods. Heck, even before that, people just bartered instead of using hard cash. Consequently, little to no debt was incurred and trust was kept in balance. As the years went by however, people began to dabble in investments and loans which at first, mostly went well. However, it eventually reached the point where they became so unregulated that the banks could do nearly anything – they were greedy to put it at best. All those completed rules, procedures, and plans to confuse people when working with a bank to squeeze every penny from the customers/investors. It wasn’t too bad at first, as most people paid off their debts, yet it eventually reached the point (sometime at 2006) where part of the system collapsed as most of the borrowers could not pay off their debts.

Why did this happen? This happened mostly because the banks tricked their customers into picking wrong options to earn a profit. In this age of capitalism, people traded money, and non-existent money or debts. This caused the system to be pretty unstable if the debts were unmet and as proven by history, the financial system had practically collapsed and had to be re-stabilized by the government by bailouts. People could not pay back their loans, so businesses closed down, the economy closed down, and even banks became more stringent in handing out loans. Yet still after cutting down on money, the big companies give huge corporate bonuses… Partly ironic in this age of financial problems.

In fact, the current national debt is 11 trillion dollars and growing. Imagine the consequences of the nation becoming bankrupt. The consequences and possibilities are horrifying to confront at best – not to mention the domino effect ensuing. Yet, as stated above, people are still greedy as before if not partially more and some areas. Sure people are more wary of their money more but, still have their petty issues with greed and pride. In fact, the main cause of this mess was not only due to greedy banks but also driven mostly by greedy consumers. They had the “I want it now!” mentality on having items. Thus, most of them took loan after loan to buy item after item never feeling satisfied – leaving an increasing pile of debt. Where did this lead to? The situation we now all see and encounter today. It did drive the GDP of the country up (short-term gain), but at a huge negative (long-term) cost.

To be even more precise, some keywords here to note would be short-term and long-term. I would go highly into detail on this topic today (I’ll focus on this at another day), but to put it bluntly, people more or less, focused on the short-term rather than the opposite. The majority of the population, low-level or high-level, focused on short-term pleasures and never saved up - eventually causing this huge deficit across the world. This is one the primary faults of the human race and must be addressed (as in more heavily) at one point or another if we wish to survive.

But, many will ask, “Can we escape this crisis?” The answer is yes or no. It depends on whether the people of the U.S. can cooperate, spend less, and save more. It will decrease the GDP, but it’s better than increasing the national debt at the rate we are going. The next thing would be to fix the government policies that waste money and reward the wrong people. Afterward, we must team up with other countries to fix up their messes and eventually hit the green – if possible. Of course, many countries won’t cooperate – but, it is in our best interests if we do. Besides, it is better than having more wars all across the world. On the other hand, we may be able to take out this problem but only for it to come back as “history repeats itself”. Yet, if we (as in, a majority of the world’s populace) can band together to push for a better future we can theoretically, fix this worldwide financial crisis and avert a world war. It is a huge demand to ask for and may be a too optimistic goal for the most of you, but we all got to try. That’s one of the beauties of the human-race, banding together for a common-goal whether it be malevolent or benevolent.

Thank you for staying through this minor-essay of my thoughts! I hope you enjoyed it and I also hope to see you all tomorrow. As always, suggestions and corrections are welcome. Remember to refer this to your friends. This is Delvarian for “Delvarian’s Assorted Stuff”, signing off for the day!

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