Forum Post: What happened to the economy?
Posted 12 years ago on Nov. 12, 2012, 3:07 p.m. EST by stevebol
(1269)
from Milwaukee, WI
This content is user submitted and not an official statement
I never took economics and don't know a thing about it but here goes. Take a penny and double the amount everyday for a month. What happens after about 20 days? You start getting rich. Moore's Law works somewhat the same way. In the early 90's, say we were at around day 15. The remaining days left of the month could describe the digital bubble. Somewhere around the year 2000- 2006 the bubble burst. Now we're screwed. Wonder what happened to the economy? We've been living according to Moore's Law.
Moore's Law states that the speed of computer processors doubles every 18 months. When you base an economy on this mindset it is destined to fail at some point.
Everything that led up to the collapse of the economy happened in the mid to late '90s. The most important element was when both parties in Congress in late 1998 decided to repeal the law that was enacted in 1933 after the financial crash of 1929...Glass-Steagle. Glass-Steagle was put in place to separate investment banks from depositor banks. In the 90's when this was repealed, the banks were allowed to merge and risk depositor funds on investments. This went against everything that had been put in place after the lesson was learned 60 years earlier. This also led to the banks becoming "too big to fail" a decade later.
Besides that, in the mid '90s, banks were forced to loan money to high risk individuals after the Community Reinvestment Act was enforced. In 1993, Citibank was sued for not loaning money to a high risk individual (Obama led the lawsuit, by the way). Citibank lost and the banks were forced to loan to this individual with Fannie Mae and Freddie Mac covering the risk. This is what started the housing bubble. Now banks could loan to anyone and they found a new way to make easy money with no risk to themselves. The gov't backed the loans thru Freddie and Fannie. The banks got greedy with the risk free ease to make millions. In this case, government got in the way of free market principles and as usually happens, the unintended consequences took down the economy. People have argued that it was a lack of regulation and in the first case that would be true. Whenever you have federally insured funds, you must have regulation to keep taxpayer funds safe from corruption and risk, but in the second case, the regulation that was put on the banks actually caused the housing bubble and led to the collapse. (Note: the senators and congressmen that repealed Glass-Steagle also got rich by that move and most are still in congress)
It is now 4 years later since the collapse and Glass-Steagle is still not reinstated. No one is even calling for it to be reinstated. The Dodd-Frank bill does not address any of the issues that caused the collapse especially Glass-Steagle. It's noting but a watered down piece of crap to appease the masses. Most of it hasn't even been written. (How do you pass laws that haven't been written?) The banks are still gambling with high risk, knowing the gov't will bail them out. The people that foresaw the collapse were silenced. The people that caused the collapse are running the show, including Geithner and Bernanke.
I know the talking points of the last 5 years are that the policies of Bush caused it but in reality, it was the policies of both parties in Congress that caused the damage and both bills that started it all were both signed by Bill Clinton. If people would get off the politics and read up on the actual history of what happened and quit blaming the wrong factors, we maybe could fix what started this. You can't fix a problem if everyone is lying about the cause. The people that were a main factor in the expanse of the mess are still in power (Geithner & Bernanke & others) and the people that actually caused it are still in Congress. Even in this election we just had, the same Senators and Congressmen were reelected to their seats. I keep trying to get people to scream to their representatives to re-instate Glass-Steagle because that would break up the banks but no one is acting. Instead, all I hear are hate speak from people with political agendas and if you don't agree with their talking points, you are called all kinds of things. I personally don't care what I'm called as long as a massive group of people would scream to their elected officials to reinstate Glass-Steagle. Maybe now that the election is over, people can get back to the important issue....let's break up the banks. Until we do and learn from history, we are destined to repeat it.
Interest rates have been on a downward trend from 18% since 1980.
Now we are at 0. Time to rely on our brains, ambition and ability to work together....
Uh oh!!