Investment is one of the most important variables in our economy, as it impacts individuals, organization, banks and international economy in general. When the global market fell in 2008, “it swept up many jobs, cost of living, availability of credit, and the economic stability of countries” (pg 138). When many people failed to pay to pay mortgages on their house or on any other kind of property, and big companies like Washington Mutual held these mortgages failed. Because the banks started give out loans like they are giving out free goodies, everyone had a house, but who is going to pay all the mortgages back? The bankers did not think about that while giving the loans and that is why we are all in debt. They started to give money to big institutions as security money, and they lost all the money in the stock market, which led to our economy downfall.
So how did we get here? Instead of saving money to buy a house, many Americans found that it was easy to take loans from the bank, even if their income would not support it, and some were tricked by subprime mortgages to sign a loan. Wall Street thought by giving everybody loans, they would make money off from them, but what they didn’t know is that, how would people pay their mortgage on their houses if their income wasn’t enough to pay the bank back? Suddenly the housing markets started to rise; banks and investors kept buying and selling for a greater profit. And so the debt started to get bigger and deeper. And so the big companies, who were supposed to help tradition mortgages, they decided to buy and hold billions of dollars of the securities.
The economy started to get lower to a point where almost everyone started to get affected from it. Home prices fell; bank ran out of money, people couldn’t pay for their house, so the bank took their houses but couldn’t find anyone to buy them. Also investors pulled their money out of the stock market, soon enough, big institutions didn’t have enough money on hand to pay off the obligations, and the banks stopped to give loans and to try the save the money they already had. Since loan was the only way to finance the purchase on home, car, college education, people had to either stop buying goods from the market or but it from the money they saved. Most people weren’t doing that because they were trying to save money.
When banks stopped lending money, business started to lay off workers, people didn’t have enough money to buy cars, automobile industry was in jeopardy, and when people couldn’t buy houses, banks were in trouble. Because our securities are traded worldwide, our economy only started to get weaker
Immense amount of damage to our economy has been done, but we need to take further steps in order to refine our economy and status of our country. The first step is to “fight a severe shortage of demand in the economy” (The Banking Crisis). Which can be done by lowering the rates of goods, so most people can invest in our economy and give as much money as possible, so we can bring our economy up. We also want to create jobs, so that people would make money and invest it, and it is goods that people are still getting health benefits and unemployment benefits, so they are making money for us. If people have enough money to spend, and mostly people buy stuff from their credit card, so the next step would be to “heal our financial system so that credit is once again flowing to the business and families who rely on it” (The Banking Crisis). If we get our credit back on track, then banks would be able to give us loans, without having the doubt of us paying them back.
When the Wall Street crashed in 1929, World War II bought our economy back on track, but we do not need another war to fix our country’s economy. To prevent our economy from crashing again, we need to make sure that we are investing money; it is going to the right hands, and not the big institutions who will keep our money. We need to create many more jobs around us, but we also need to get people in school, so they can work. White House sponsored a Jobs and Economic Growth Forum, has found some way to stem job losses that have caused the worst unemployment rate. But here is the hard part, how do we do it? “At least until unemployment drops below 6%, passing an extension to about-to-expire Bush era tax breaks will help small business owners keep more of their profits, and represents a straightforward common-sense solution that the president can put into place now” (Ten Ways to Create Jobs And Put America Back To Work as Unemployment Rate Drops to 10%). Another thing that can be done is to widen the TARP. We can send our TARP money to agencies such as the EPA, as well as directly to cities to be used for things like urban redevelopment we need to stabilize everything, so that people like us won’t be worried if we buy something in this economy and worry about losing it all. It is good that Congress has raised our unemployment benefits, because of that we are seeing consumer spending to improve. Unemployment checks aren’t going to turn our economy around but if people don’t have the money, they won’t be spending it.
There is always a bad side to everything. If our economy starts to do good, cheaper goods will be exported from other countries affecting the local industries; people’s lifestyle has changed, and has become more lavish. A closet full of materials comforts them rather than on saving money that they do not need.
-R
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