The Great Fall
…can humpty dumpty be put back together again…
I’m certainly not an economics expert but from what I can glean the economic crash we are seeing right now is primarily due to an inordinate amount of public debt, driven by banks issuing/consumers taking mortgages/loans that were secured by bogus insurance issued by Corporations that “we the people” are bailing-out. The effect is, banks and insurance companies who hold the mortgages, can’t borrow money and those who have money to loan won’t let it go because there is too much unsecured debt in the system (insolvency).
As more and more people are unable to pay there mortgages, they flood the banks and it just makes the problem worse. The value of the homes are worth less and less because there is an excess of homes on the market (exacerbates the problem of solvency). Leaving more people insolvent because their equity is lost to the market glut and what they owe on their home is greater than the value of their home on the market.
Additionally the consumers are holding a huge amount of debt in credit cards and auto loans which will inevitably fallout in a similar fashion (local failures). The market of the past decades had growth based on unsustainable debt. Now that the debt has come due and loans have stopped, the markets can no longer be sustained (debit crisis not credit crisis). Since there is some much bad debt out there, anyone who has secure money to lend won’t because of all the risk in the market. So far the bail-out from “we the people” has done nothing to solve the crisis.
This situation puts a temporary surplus of goods on the market at low prices (especially commodities, see oil fall) but shortly the surplus will dry up because no one will loan money to produce more goods because no one can pay their debt. This sets a “spiraling crashing thing” in motion which consequently leaves more people vulnerable, because they have lost their jobs and can’t pay their debt due to of a lack of production. Prodction has stopped due to a lack of consumption because no one can afford to carry any more debt (kind of circular I know; i.e. – the “spiraling thing”).
Some say it took decades to build all this debt based economy it will takes years to recover. I think this is not a matter of recovery but rather it will be a transformation of Capitalism. What that looks like won’t be clear until we clear some of the train wreck from the tracks.
basically the system is fucked…. …so it seems if humpty dumpty can be put back together again, he will probably look like scrambled eggs and will never be able to sit on a wall anymore…
Add facebook comments
Kick things off by filling out the form below.
Leave a Comment