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So, without getting political, can someone explain the economic crisis to me?

Discussion in 'Off Topic [BG]' started by Deluge Of Sound, Sep 29, 2008.

  1. Deluge Of Sound

    Deluge Of Sound Banned

    Nov 8, 2007
    I've tried google, I've kept up with it in my daily news browsing, but all this stuff is just making my head spin, especially now that the bailout didn't go through...

    So, what happened, what's happening, and what does it mean?
  2. It means better get used to being poor and hope that you live close to a farm that's short handed
  3. selfblessed


    Dec 29, 2006
    Phoenix, AZ
  4. Deluge Of Sound

    Deluge Of Sound Banned

    Nov 8, 2007
    Oh, I've got no problem with that.

    But that's not all I asked for, I also asked for an explanation.
  5. bwv1013


    Mar 20, 2008
    southern cal
    here's my take on what happened:

    the internet boom came and went. the market adjusted itself and the tech sector calmed down, but there was still some residual "spending habits" that people carried over from the good times of internet economy. lots of people bought homes and prices went up, to the delight of lending companies that had no problem issuing zero down home loans and adjustable rate mortgages. fast forward a few years, the market adjusts itself again, homes are worth less, and the lenders that gambled on high risk real estate loans are struggling with debtors who can't afford to pay and property that has declined in value. great time to buy!
  6. Relic

    Relic Cow are you?

    Sep 12, 2006
    Robbinsville, NJ
    I agree with bwv's post, I think that sums it up nicely.
    What it means to all of us "little people" - less extravagance, more thriftiness, and the need for more common sense will now be thrust upon us.
  7. bwv1013


    Mar 20, 2008
    southern cal
    bingo. never a better time to live simply and save money.
  8. Phil Mailloux

    Phil Mailloux

    Mar 25, 2005
    Brisbane, Australia
    Builder: Mailloux Basses
    Call me stupid but I don't get it.

    Why's everyone freaking out about being poor? So the financial market is going boobies-up, what does this mean to the average Joe?

    Eveyone's still got their jobs and living the same life as usual no? Paying their house, cars, buying bass gear...no?

    What's going on in the states that I'm missing? Have interest rates gone up 500% or something???
  9. MyUsernameHere

    MyUsernameHere ?????????????

    Nov 3, 2007
    Lexington KY
    And buy some guns...and build a impenetrable saferoom...and stock up on water and food...and make-up your car like the one Mel Gibson drives around in Mad Max.

    Seriously, its time to start panicking people. Once the zombies start digging themselves out of the ground and you don't have enough money left in your bank accounts to buy some decent flamethrowers, it'll be to late.
  10. And wash behind your ears.
  11. Psh. Once the zombies start coming, you think I'm going to *pay* for flamethrowers? :rolleyes:

  12. Phil Mailloux

    Phil Mailloux

    Mar 25, 2005
    Brisbane, Australia
    Builder: Mailloux Basses
  13. steamthief


    Jan 25, 2006
    Mentone Beach
    If you've got a job with a 401k tied to the stock market, expect it to lose most of its value.
  14. jkritchey


    Jul 23, 2002
    Northern Va.
    If your serious, read Steve Pearlstein of the Wash Post and PBS. Go back a few weeks into the archive if necessary.


    Bottom line: if something doesn't happen, sharpish, houses can't be financed, nor cars, nor commercial vehicles by your plumber or electrician, nor college loans for your kids, nor money for your music store to keep instruments in stock. Since every small to mid size company relies on a line of credit to make payroll (ALL of them, it's standard practice), people get laid off, then it all swirls further down the pipe...

    Or not...hope your representative understands better than most.
  15. JacobE


    Jul 19, 2008
    effectivley, this was due to the under regulation of the financial sector, people giving large high interest loans to people who couldnt pay them back than those companies being unable to meet theres debts from other seas or bigger comapnies, colapsing because they whewre in debt, in five years every thing will be back at a stable level
  16. Ty McNeely

    Ty McNeely

    Mar 27, 2000

    Right now, people have their jobs. In 6 weeks, if things don't get better, MANY people won't have their jobs. Unemployment could reach 10-12%.

    My quick version of what happened with as few politics involved as possible:

    Mortgage lenders loosened their lending standards. Thousands of people who couldn't afford it were given money for a home. They didn't pay, their home went into foreclosure. Investment firms who had bought the mortgage from the broker/lender then started to feel the hit and eventually tanked (see Lehman and Bear Stearns). This creates a ripple effect and causes other banks and financial instutions to fail (see WaMu, Wachovia, etc). This causes ALL lenders to tighten up. Since the US economy runs on lending, everything stops---people don't buy cars, businesses can't expand, people can't buy homes...etc. etc. etc.

    Bottom line is that credit in the US is going to dry up for everyone who has anything less than a stellar credit rating. Businesses won't be able to grow, and jobs will be cut. The economy will begin to slow, more people will lose their jobs, and the value of the dollar is likely to drop significantly, causing costs for those who still have a job to go up significantly.

    That's it in a nutshell. I think. I probably missed a few things.
  17. HollowBassman


    Jun 24, 2007
    Hancock, MD
    You know the story about selling your soul at the crossroads? Payment is due.
  18. No.
  19. baalroo


    Mar 24, 2008
    Wichita, KS
    The deal with the mortgage crisis basically went like this(very simplified):

    Companies started buying loans from banks in huge chunks, figuring as long as they bought say 10000 loans that were running at (for example) 7% interest, then even if 6% of people defaulted on their loan, they'd still make a 1% profit. This worked REALLY well for everyone because the market was stable. The banks realized that it didn't so much matter if the people defaulted on their loans, because they were selling them off in those big chunks... SOOOO they started relaxing their requirements so they could sell more loans. Once the housing market got over-saturated it all collapsed like a house of cards.

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