Scroll of Economic Crisis

Alright, if you haven’t noticed that things in the economic world aren't so dandy.  Today’s scroll will talk about the causes of this downward spiral. I think this crisis was caused by overspending.   People got caught up in the material things that they didn’t need.   People were so obsessed about their image that they would buy things with money that they really didn't have, just like in the 1920’s people got carried away with the modern conveniences. In the 1990’s new technologies hit the market and everybody wanted to have the newest thing.

I think the whole reason we’re in this is because we have a flawed economic system.  My personal opinion is we rely too much on technology.   I’m talking about electronic money and electronic banking.   Yes, technology is great and can solve many problems, but sometimes it just makes things worse then they already are. People can get away with buying things they shouldn’t, a new car, new TV, new house. The banks and credit companies gave people major responsibility and people took advantage of that. That’s what made the banks fail. People took loans out from the banks they couldn’t pay.  Then when the time came to pay up, they couldn't. When the bank has no money because people don’t pay them back, the people who saved lose their money too. When the banks fail people lose their faith and stop spending, they retract into their shell.  When people stop buying products suddenly, the demand goes down. The demand goes down too fast so the suppliers keep supplying, then you end with the demand overlapped by the supply. That causes the suppliers to cut the workers because nobody’s buying, so they can’t afford to keep everybody. The newly laid off workers stop buying because they don’t have a job. They stop buying because when they had a job they thought it would last forever, so they bought stuff they couldn't pay for, a new car, a new house, a new TV. Well at this point it very hard to dig ourselves out of the hole were in.

Let’s recap, it starts with people being irresponsible, then the banks fail, then the responsible people lose their money, so they stop buying. When nobody's buying the suppliers cut workers to keep a profit, that in turn causes less spending which causes more people getting laid off, so on and so forth. In my opinion the cycle can be broken in three ways. Number one: The people who have money suck it up and start buying again. Not very likely because nobody wants to risk their money.  Number two: the businesses suck it up and hire people again. This is also not very likely, but more logical because big businesses made a lot of money, so the people high up have money saved. Number three: government will bail the people and the big businesses out. This plan is like the first one but in a different packaging. We pay the bailouts through taxes. This is the most likely to happen because we already started. The big problem is that people will be opposed to this because it is their money. What people need to realize is that someone has to take the hit.

Now once we’re out of this hole, we need to learn from our mistakes. We went through this before. I think we need to pay as we go. Save if you want, but make it so people can't borrow money they don't have.

For a good explanation of the credit crisis follow the link:  http://www.youtube.com/watch?v=qqUGoVez8xg