Time and patience will get us out of this eventually, the market has to correct itself. But this whole mess was a whallop to the US economy and other economies around the world, so it will most likely be a long recession.

I'm not of the opinion shared by some that the sky is falling. Jobs get lost and business go out of business, its the ebb and flow of economics. This has just been exasperated by an over excess of free spending. It's hard to generalize this whole fiasco without trivializing the dramatic effect it has on real people's lives, i.e. those that have lost their jobs, or homes. It's a sensitive subject for a lot of people. Hell, even people that did the RIGHT things are being penalized by higher credit card rates and job losses.

I really hope it ushers in a new era of responsibility, but I doubt it will. The American Public have a very short memory for lessons such as these.

We don't make stuff in the US anymore. Real goods means real money. Only so many people can make money shuffling paper debt or in a service related capacity.

Publicly traded corporations have their stocks upgraded or downgraded based on earnings expectations. Who does the grading? Banks. The bulk of the corporations are still generating income. The primary stockholders (the ones that can sell their options, buying company stock at a huge discount vs market price) are the ones the most influence on employment. Those folks' discounted stock price comes at the expense of those who are employed at the corporation.

Check the board of directors of most the corporations, and you'll find that they hold a board seat at other corporations. Many, many, people are losing jobs because of the choice few that hold those seats of companies that still can earn income will full work forces in those companies.

So far as you personally, LiL stumppy, there's no shame in attending trade school in lieu of college, and there's no shame in joining the military.

See Mark M above, much better than anything I'll offer

I would call that a smart move
always be a need for carpenters*
electrians - plumbers - mechanics ect

First of all, it'd be nice if people posting here would share their experience in this area -- blaming the issue simply on housing or the media does nothing but display a stunning lack of knowledge of the larger issues.

I write financial education articles, keep track of and do summaries on financial and banking industry news, and a whole host of other writing and researching duties for a financial services company.

I am not, however, an economist. So keep that in mind.

Now that's out of the way ... ;) :)

The nowhere near short, fairly-non-political answer is the following:

1. America, and an increasing part of the world, runs on credit. So much so, that we have a negative savings rate in this country (people are spending more than they save).

2. Banks and investors package all of this debt -- credit card debt, mortgage debt, etc. -- and sell it off to other banks and investors, offering them a certain rate of return.

3. For a while, all of that packaged debt was zooming in value ... even though no one actually had any freaking clue what it was worthy, and no regulators were ensuring those selling the investments were giving honest disclosures.

4. A lot of the debt in #2 was mortgage debt, which was making TONS of money because housing prices were skyrocketing (a.k.a. a bubble). This has happened before, such as with Internet company stocks in the 90s: people think something is worth a lot, even though there's no real way to tell what the value really is. But folks are making money, so what the hell?!

5. A lot of those mortgages from #4 were "subprime" (a higher interest rate product for those with high risk of not paying) or adjustable (payments start low, and then go up after a few years). A lot of subprime folks lied about their income or were swindled into loans they couldn't afford, so they defaulted. A lot of adjustable mortgage folks had their payments go up after a few years to levels they couldn't afford, so they defaulted.

6. Since people weren't paying their debt, the investments based on that debt started to go south. Folks who were making tons of money were suddenly losing it.

7. Banks and businesses and pension funds and mutual funds and lots of other people also started to see their investments go sour.

8. Accounting rules for banks state that any investment on the books must have its value recorded as what the investment is worth right now (called "mark to market"). So banks that once looked great because those investments were making money in 2003, now looked unstable because they had to report the value of the investments after people stopped paying their debts in 2008.

9. Due to #8, dozens of banks suddenly lost billions of dollars in value because the investments they had come to rely upon were worthless. So they stopped lending to other banks (which they do all the time, and what the Fed Reserve is discussing when it lowers or raises rates), to businesses, to people ... everyone.

10. Since Americans and an increasing part of the world relies on debt, once lines of credit dried up for everyone -- even those with great credit -- the whole system started to collapse.

Now, that's a really 50,000 foot view. Regulations were changed and/or ignored ... lots of people used their homes as ATMs and got second mortgages for a boat and a jet ski and other crap ... people relied too much on credit cards instead of paying cash ... and the "free market" once again proved that it does not self-correct -- it takes as much as it can, ensuring to privatize the profits and socialize the losses.

Don't get me wrong -- free market theory is wonderful. But unfettered free market capitalism in reality has been proven to do major damage. We really need a middle ground -- free market ideas and spirit, but with enough guidance to avoid exploitation, yet at the same time also not horrifically constrictive.

Again, that's my understanding of it based on my professional experience. Take it for what it's worth ...

MM
~~:shrug:

:clap: Simply wonderful, and something that has to be part of any "recovery" (for lack of a better word).

:thumb:

In many ways, college is ridiculously overrated. I loved it, but there are times I wish I had gone to Wyoming Tech and built cars for a living.

One must also note that attending college and getting an education are NOT necessarily the same thing.

MM
~~:)

I wish I had taken autobody
could have taken a half day in highschool
but nooooooooooooo

Excellent post :bravo:

However I would add a 4.5 in there...

4.5 These securitized debts (repackaged into investments that could be sold), were then leveraged into credit derivative swaps. I seriously don't know what the **** that really means despite reading about it, but as far as I can tell it's a side bet placed on whether or not the original debts will be paid. However we allowed side bets worth far more than the initial debt. So maybe you had 50 billion in actual mortgage debt out there, but with 500 billion in side bets on whether or not it would be paid. AND these finance wizards BORROWED to make these side bets.

EDIT: Here's a nice explanation of credit derivatives that Lehman brothers put together in 2001. Oh this is just too ironic:

http://www2.wu-wien.ac.at/vgsf/curri...0Explained.pdf

I'm a motor man myself -- still want to learn how to rebuild a carburetor.

Although, I can spell "carburetor," so I got that going for me ...

MM
~~:D

Meh. Not really.

I've read articles which read the same terminology and that's the clearest explanation I've seen so far. Not quiet crystal clear but better.

Rep

That's actually a quite decent explanation of derivatives. :clap:

It makes my brain hurt just thinking about how many people made -- and then lost -- so much money, and were that leveraged, without anyone saying a ****ing word about it.

Well, not anyone who was listened to -- those guys were called "alarmists."
Although history might call them "prescient."

I'm just glad I have another 30 years or so before I plan on retiring. I just may make up all I lost by then ...

MM
~~ROFL Oh, wait ... :sulk:

Hang in there dude, just be glad you are in HS and you aren't like alot of people who are struggling.

It sucks lately i had a job interview (a really nice one) and then heard from them that i had to wait longer cause there was a hiring freeze....i was pretty pissed...so i play the waiting game

Are they even making carburetors any more? Everything is injected now.