What was the 2008 financial crisis?
After watching The Housing Bubble, I realized that the 2008 financial crisis started long before that. I think you could say it might’ve developed in the 90’s. Bill Clinton wanted Americans to own their home, but he got it wrong because usually you will save your money then buy a house, but he wanted Americans to buy a house and then save. Yes, that can be a good plan but with no prior savings you might not be there for a while. Then President George W Bush wanted Americans to own their house but then the housing market started growing in a bad way. The banks were loaning money out to people with a credit score of 660 and it takes a lot of bad things to get to 660. There were about 27 million of subprime mortgages and that was only half of the mortgages. The interest rates were artificially low, so it wasn’t going to be a good plan. So basically, the banks were generating money from a computer and the banks weren’t getting this money. Then all the people who are at that bank have their money go in a pot and as soon as Alexa needs $50 that isn’t coming out of her account it is coming out of Bill’s account. As soon as Bill wants his $50, he is borrowing from Dan. Its never your money in the banking system but after this it was a confusion on if the money was real or not. So, people were feeling wealthy, but they weren’t. Before the 2008 crisis people were voicing their opinions and comparing this to the great depression but no one was doing anything. The real estate must collapse for people to start saving their money. After the housing bubble crashed there was so much money missing that the government had to bail the banks out of. Since banks were creating money on a computer and not actually printing it wasn’t real inflation. They created 2 trillion dollars and if you broke it down it would be creating 1 billion dollars a day! The money supply increased 5% from 2001 to 2005. The government can do 3 things. 1. Is taxing the money, 2. Is borrowing because taxpayers will pay it back, and 3. Is getting control of the monetary system and printing more money.
How can we avoid another financial crisis?
In my opinion, I don’t think we can avoid it because sometimes it happens too fast before we can stop it. Yes, Presidents want citizens to own their own house, but they must do it the right way. Changing interest rates for 2 years and then it is going up to 2% and then 5% will do more harm that good. If we do everything right, we can avoid it. If we just get rid of the risky loans that can help so much. Banks wouldn’t loan more than 80% of the property. If we don’t have computer generated funds that would solve half the issue.