57. Obama’s Speech on the Economy
April 15, 2009 § Leave a comment
and so we have
As has been widely reported, it started in the housing market. During the course of the decade, the formula for buying a house changed: instead of saving their pennies to buy their dream house, many Americans found they could take out loans that by traditional standards their incomes just could not suppo
The crisis di not start with housing. It started with bubble up leveraged debt, making mney with other peoples’. In the artifically rising economy people who needed houses were encouraged to buy them, making up the difference between cost and income by increased equity. If the housing prices were not forced up artificially by the bubble, the prices people would have had to pay would have been much kess (fifty percnet in some ases of the ris in price above he normal trend.).
This revisionism is bankers’ logic, not workers’.
Then he says
Then the housing bubble burst. Home prices fell. People began defaulting on their subprime mortgages. The value of all those loans and securities plummeted. Banks and investors couldn’t find anyone to buy them. Greed gave way to fear.
Why did it burst? Because wages were flat or declining and eh economy was not growing, so expected cash was not in the hands of those who neede it to keep their mortgages up. Obama here obscures that the effect has a cause.
After all, the ability to get a loan is how you finance the purchase of everything from a home to a car to a college education. It’s how stores stock their shelves, farms buy equipment, and businesses make payroll. So when banks stopped lending money, businesses started laying off workers.
So, no criticism of the debt based economy, it is normal. Even though we can see its rise in the last fourty years. And
The heart of this financial crisis is that too many banks and other financial institutions simply stopped lending money
And although there are a lot of Americans who understandably think that government money would be better spent going directly to families and businesses instead of banks – “where’s our bailout?,” they ask – the truth is that a dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth.
But the bansk profit from this activity of making money with a facot ro eight to ten times.