I can’t tell you how many times I have heard a statement like this as the root cause of the economic depression.
“”“The BLAME is on the people and businesses that LOANED or BORROWED TRILLIONS. The blame lies with people who lived WAY WAY WAY beyond thier means. This happened ACROSS THE PLANET.”“”
So the people in every single country across the planet, with exception of OPEC countries, all borrowed too much money over the same years and they all happened to crumble at the exact same time. This is called liberal economics which only comes out of the mouth of those who don’t know what they are talking about.
This is a claim that the leftist media gives and those sheep who follow them baaaaleeeeevigng that they know what they are talking about. As if the liberal media “television personalities” are economic experts while they are doing nothing more than parroting the government media complex and telling a preconceived logical story that they want the world to know.
Leftist’s philosophy and economics do not go hand and hand. Saying the word liberal and economics in the same sentence is quite comical and the liberal media is not a wise selection for your economic truths.
Now lets get to the real root cause of the economic meltdown, which is the increase in the cost of a barrel of oil. You say, how could oil have anything to do with the banking crisis or the mortgage meltdown or the automotive industry collapse, etc. Stop, don’t leave me here. Lets look at this from a standpoint of reason and logic, which is missing in the leftist distorted form of economics.
There are certain things that man today cannot go without. They include water, food, gasoline, shelter, and energy in that order. If you break a person down to a dire financial situation the number one priority is water and food for survival. Man will inherently do what it takes to survive and if all options are exhausted he will pick water and food over shelter, gasoline and standard energy.
So you may say why does gasoline come before shelter. One must get to work to buy the food that is needed for survival. Worst-case scenario a person could live in a tent or in their car. Sure the pride is smacked around a little in this situation but coworkers don’t necessarily need to know your living situation. Imagine the punch to your pride from showing up to work on a bus in a small city where mass transit is not a standard way of transportation as it is in NYC. Or spending an extra couple of hours each day waiting around for the bus and modifying your work schedule based on the bus schedule.
How about those who do not have bus transportation to work? We live in a society today that most people could not easily walk or ride a bike to work.
Here is another statement from the liberal media taking a different turn.
“””It is now fairly established that the recent crisis in US sub-prime housing market is the primary reason behind the global economic melt-down.”””
Now lets get back to the rising costs of gasoline and it’s effects on the US sub-prime housing market. The decision of the Organization of Petroleum Exporting Countries (OPEC) was to increase the cost of oil similar to what they did during the Oil Embargo of 1973-74. Oil is used in everything from planes, cars, tanks, fertilizer, drugs, plastics, etc, etc, etc. It is also used in the method of transportation to get food and all other products to stores. Increase the price of oil and you increase the costs of all goods.
Currently OPEC consists of Algeria, Indonesia, Iran, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. Basically a bunch of countries that have faired pretty well through this economic crisis until just recently when oil prices started to fall. This is why OPEC got back together a couple of weeks ago to decide if they are ready for another cash pump into their economies. Other non OPEC producers are countries like Mexico, Norway and Russia which often go by OPEC’s position of the day.
A little history. In 1973 on the Jewish holy day of Yom Kippur, Israel was surrounded. Egypt attacked from one side at the same time Syrians surprise attacked from the other. With help of the western states, Israli troops quickly outflanked them all and later a cease-fire was established. But on October 17th, OPEC struck back by imposing an Oil Embargo on the US and all other westerners that supported Israel.
The exact same thing has happened today with our war that the Muslims feel is a war on Islam.
Here’s the answer to “the speculators created the crisis” statement. You are probably thinking, how did Wall Street respond during the embargo? The exact same way they responded today. Speculators (investors) bought oil contributing to the crisis but they did not create the crisis. Just as the banks gave risky loans that contributed to the crisis but did not create the crisis. The 1973-74 Oil Embargo ended up being the middle of the great bear market that would see the Dow go from it’s high of 1051 in 1973 to 577 by the end of 1974 or a whopping 45% decline in almost 2 years! That’s right, the economy collapsed due to the Oil Embargo.
The federal government is fully aware of this. They are not stupid. They have intentionally created “stories” based on what seems to be “logical” reasons for the crisis via their “economic experts”. They feed these “stories” to the nonfunctional mass media that parrot these “stories” for the crisis as a means to not tell the world and the Middle East that the oil producing countries in all actuality are in complete control of our economy. Would you tell OPEC that they have you by the family jewels and there is nothing that you can do about it?
Now how does that have anything to do with the US sub-prime housing market? By it’s own definition, sub-prime loans are loans given to borrowers who would not ordinarily qualify for credit if customary underwriting standards were applied. In trade for the risk comes a higher interest rate.
The banks for the most part lent money to people who could afford to repay their debt. But they could BARELY repay it. They were risky to lend to. They were paycheck to paycheck after a loan. But they had been determined to be able to pay the debt. Just not to have anything left over.
Now add the radical jump in the cost of gasoline and an additional $300 in costs of gas per month to someone who is paycheck to paycheck. Now add the increase in the costs of goods and food adding another $200 dollars to their monthly budget and what does the scenario look like. So what comes first for survival? Food or mortgage? Gas or Mortgage? Gas or Food? Human instincts made the logical decision. You have to eat and that is a number one priority. And you have to get to work so you will be able to eat.
Those who were not sub-prime were not affected to the same degree, as there was a margin of error built in. But as crisis continues it’s ripple effect spreads throughout all income levels, businesses and the rest of the world. But the United States crisis was not entirely the direct result of other countries economic crisis. Oil was. The domino effect. The increase of the cost of gas and everything else related to it, knocked the legs right out from the world economy.
Now we have the automotive industry crash. The auto industry works within some very tight constraints when it comes to their return on investment. Contributing factors include poor investment decisions by the executives and the crushing force of the unions.
How could a company survive when they have to pay their workers 123% more in wages than the average manufacturing worker? Compare their salary to state college professors. What exactly is so special about assembly line work? Most of them have nothing more than a high school degree.
$75 is the average cost per hour of an autoworker. That is based on a 40 hour work week - with overtime this figure gets even more ridiculous.
$1,500 to $2,000 of every car goes to pay the health care costs and benefits of UAW employees.
GM pays $17 Million dollars a year for Viagra
Quite simply put, how can a guy who makes $15 dollars an hour pay for a car that is made by a guy who makes $75 dollars an hour? Especially when he was paycheck to paycheck prior to the economic meltdown which created a dire eat or pay your mortgage situation for him.
So the question now is, how exactly has Bush’s multi billion and Obama’s multi trillion dollar bailouts helped eliminate our dependence on foreign oil? How much went to useless social programs? How much paid for the Band-aids to cover the wound but not actually fix it? I would be willing to bet that almost all of it did. And, If we spent every penny of the trillions taken from the American tax payer on developing energy solutions would we have been able to completely eliminate our dependence on oil imports?