Quote:
|
Originally Posted by Fresco
Thats what I always wondered too.
Is the current financial and economic mess the US is in right now direct karma from the mess Bush created in Iraq??
|
No, the current economic situation was created by the policies of a capitalist society. I'm by no means an economist - But it works something like this - increase inflation which enables employers to employ more people, but employing more people means paying a lower wage in order to keep profits up.
In the mean time, when businesses are doing well, they stop borrowing so much as they have their own capital. But, the banking business relies on people lending and paying interest, in order for it to pay interest to those with savings.
So when the rich stop needing to borrow to grow, banks look for a new market in the workers on a lower wage. When the lower waged workers have borrowed up to their limit, the banks run out of people needing loans. Their answer is to reduce the criteria based on the ability to pay the loan back and lend to people who can't afford to pay it back.
Those people can't help but default on their payments. That costs the bank, so they raise the borrowing rates, and then the next lowest payed can't afford to pay back. Then they drop the interest rates paid on savings, and the big companies profits drop. Then they make people unemployed to keep their profits steady. but with more unemployment, their is less money being spent in the economy and yet more people default on loan repayments. So the big companies are selling less and making less profit. So the companies make more people unemployed, and more unemployed people can't pay back what they borrowed.
Until eventually, the bank has to go to the company and say "hey, you know all that profit you put in to our bank, well we kinda lent it all out, and it isn't being paid back because you made the borrowers unemployed...and so we're really sorry, but we haven't got your money anymore... oops"
That is certainly cause and effect, but it has a much more down to earth cause than Bush's war.
Linear Mode
