Science Chats Forum

How do we fix America's economic situation?

We dont. it is cyclical and will come back around soon enough. always does and always has.

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The Biggest Boards: Free Directory and Webmaster Forums | Blog Disgusted at Political Disgust

By telling politicians and the gov't to not interfere. After 9/11, the fed lowered interest rates very quickly to avoid going into a very deep recession. Those low interest rates is what made the bubble in the housing sector and eventually when we had to raise interest rates, it put a lot of people in a tough situation today. Now we're lowing interest rates again, the gov't is bailing people who should have never bought a house out and creating tomorrow's mess.

By raising taxes of course! Haha I'm kidding.

I completely agree with you.

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By getting rid of systemic corruption on all levels. Then, the natural beauty of capitalism will come through even more.

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MOCK - heh heh

hard to use 9/11 as an example since it is to date such a unique situation for our country, but you are correct in general in your thinking and directly relating to what happened soon after 9/11. I also think that part of the current problem is to be blamed on the practices of the lenders more so then just the low rates. The problem was not so much the low rates as the NO MONEY DOWN and INTEREST ONLY mortgage loans they were allowed to approve. this created the problem more then anything else with people having massive jumps in payments they were not ready for and then being unable to unload the homes they now can not afford.

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The Biggest Boards: Free Directory and Webmaster Forums | Blog Disgusted at Political Disgust

I don't think lower interest rates caused a real estate bubble. Lower interest rates make it more affordable but that was quickly negated by the higher prices that soon followed. A real reason real estate took off, besides speculators, was how tangible assets of all kinds took off after 9/11. After a disaster and the economic fear that follows, tangible assets shine as a flight to quality and real takes place. That is why things like treasury bonds get bought up. Tangible assets like bullion and real estate, as well as stocks that are tied to tangible assets or stable, positive cash flow, took off.

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MOCK - heh heh

To TV - I was using 9//11 as an example of what happened to interest rates. They really had no choice and I think lowering them was the right move. But then after being at such historic lows, they were raised so quickly - that's what the problem was. You could also argue that the people that took these loans were at fault because they didn't totally understand what they were getting into for whatever reason. The banks are also dumb for giving some people loans that they couldn't afford. Now our gov't is bailing out both the people who shouldn't have borrowed the money and the banks that shouldn't have lent it.

I'm thinking of buying a car. Maybe I should buy a Mercedes that's way outside of what I can afford so that the gov't can bail me out too. The just makes me angry (though a bit off topic).

To Wolverine - I think that lower interest rates caused the bubble because money was so cheap. Almost anyone got a loan and because the stock market was in such bad shape, people turned to real estate and commodities to put their money. Once interest rates went up, it caused loans to become more expensive and the real estate bubbble popped. Hopefully the commodity bubble will pop soon too because those prices can't keep going up forever.

My point was that only time can fix the economy. Anything the gov't does (for example: spending money it doesn't have) prolongs the turnaround or makes the next recession even worse.

Your questions has been on my mind for quite some time.

TV, viperxx, kensh and Wolverine, you have made some good points. Thanks

It was really a combination of factors in my view. The interest rate drop only lowers the carrying cost per month by so much. Yes, it makes money cheaper and can really add fuel, but once the prices go up, that effect is negated.

For example, a house costing 260K at 7% may costs about the same per month as 320K @ 5%.

What made the bubble pop was people no longer willing to buy at those carrying costs AND people defaulting on their loans.

So I feel that what really fueled things was a combination of speculators, investors, and people who could not really afford things - i.e. creative financing. If it wasn't for the gigantic amount of people trying to make fast money or get into homes they really couldn't afford, there would have been no bubble worth talking about.

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MOCK - heh heh