Warning: rant approaching.....
The US financial crisis has been sitting on my mind a lot lately. Probably because we in Canada have a similar economic system so it will be interesting to see how the US deals with this problem.
From what I understand, the banks were giving out mortgages at far below prime. The people receiving the mortgages were told they could afford them when in fact they couldn't. The prices of the houses were inflated as well so the people were buying houses they couldn't afford at interest rates that were ridiculously low on houses that weren't worth the price. The banks then were dealing with foreclosures because the people couldn't afford the mortgage. The banks had so many foreclosures they couldn't sustain themselves as lenders (from what I understand, they must have a specific amount of money on hand in order to create new loans and make money). Now the banks are expecting the US government to bail them out of a situation they created for themselves. The people running the banks received huge profits off of the transactions, but they don't seem to want to put their own money towards repairing the damage they have done.
The banks should have been more regulated by the government in order to avoid this problem entirely. But the US doesn't seem to like the idea of being monitored and in fact, they seem a bit paranoid about it. The biggest difference in the US and Canada seems to be the perception of government. Canada's government is there to protect and serve the people. They take into account (most times) what is best for the citizens. The US government is run by the CEOs of the banks, pharmaceutical companies and health insurance companies. Here, big companies might have some say in lawmaking or decision making, but in the US the government seems to be actually afraid of these huge companies and bends to their every will.
Now what about the financial crisis? It was created by the banks giving out loans in order to make more money so the CEOs would have bigger paycheques and to the detriment of the citizens. The economic system is designed to work the way it's been working and is doomed to fail (and has been since it's creation) without some kind of government intervention or regulation. What will happen if the government doesn't bail out the banks? Is bailing out the banks really the answer to the problem? I don't think so. If the government pays off the banks, then the banks will continue on the same lending path they were on, and the economic failure is only put off for another generation to deal with. If the government doesn't bail them out then the US fully enters a depression that will take years to recover from.
One person I know had the suggestion that if the US government could find 700 billion to pay off the banks, then they should first pay off the mortgages and let people keep their houses. In my mind this just shows the mentality of the US citizens. The idea that they can get whatever they want without regard to cost or consequence. I am genuinely sorry for the people that didn't understand that there was no way they could ever afford their house and that they were hoodwinked into overspending. But it seems to be an epidemic in the US, this idea that they can live the 'American Dream' and not actually pay for it.
It seems like an economic collapse is iminent as long as the US keeps trying to patch the system. It seems to me they need to create a new system (or even modify the old system) that doesn't allow Big Business to continue abusing the General Public, but then it wouldn't be what the US stands for now would it?