From 2001 through July 2007, the American economy acted like it was crazy. They bought like crazy, and took on enormous debts - citizens as well as the government.
During those happy years, credit was cheap. Banks handed out expensive mortgages to poor borrowers. The entire American economy was like a giant pyramid scheme.
Huge demand led to two large bubbles: in real estate and stocks. Sooner or later they had to explode. And that is the difficult process we are witnessing now. Inflated prices are falling, risky investments are being wiped out, excess profits are disappearing, and the overly adventurous banks are being replaced.
That is why it is not a panic, but a hard and vicious process where all of us are paying the price. Because when the U.S. economy catches a cold, the entire world falls sick.
No comments:
Post a Comment