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Prior to the Great Depression, a tremendous loosening of credit allowed almost anyone to buy far more stock than they could afford ... on 'margin.' In the 2000-2005 housing price 'run-up', almost any "investor" could buy far more house/s than they could afford ... on 'credit.'
As prices spiked, most of these "wise investors" refinanced inflated property, cashing-out with more cash than they had 'invested' in the property. This new 'refi wealth' was then spent on more property and 'stuff' people could not otherwise afford. Suddenly, the 'bubble burst,' leaving millions of now "defrauded investors" owing more than their property was worth ... or they could realistically hope to pay. While this may be a bit of an over-simplification, I don't believe it is really that far from the truth.
What do you think? "What really caused the crisis?" or "How will/should history record it?"
Prior to the Great Depression, a tremendous loosening of credit allowed almost anyone to buy far more stock than they could afford ... on 'margin.' In the 2000-2005 housing price 'run-up', almost any "investor" could buy far more house/s than they could afford ... on 'credit.'
As prices spiked, most of these "wise investors" refinanced inflated property, cashing-out with more cash than they had 'invested' in the property. This new 'refi wealth' was then spent on more property and 'stuff' people could not otherwise afford. Suddenly, the 'bubble burst,' leaving millions of now "defrauded investors" owing more than their property was worth ... or they could realistically hope to pay. While this may be a bit of an over-simplification, I don't believe it is really that far from the truth.
What do you think? "What really caused the crisis?" or "How will/should history record it?"
Someone beat you to it....
The late-2000s recession, sometimes referred to as the Great Recession,
I think it will be seen as a little bit of both. When things are going gangbusters, people get caught up in the excitement and do not want to believe it will ever end. The people that were shouting from the treetops that this problem was coming were shunned and ridiculed. I think there was greed, ignorance, and misfortune all around.
The late-2000s recession, sometimes referred to as the Great Recession
I think jghorton was referring to the Great Depression of the 1930's.
In any case, referring to the 2008 "event" as a recession is wrong - unless
you buy the government's claim that we are no longer in a "recession."
.... any takers on that ? ...
Depression = recession lasting more than 4 quarters.
There has been a moderating of a continuous economic downturn that
started in 2008. There has been no recovery. This is a depression
and it has been going on for the past 3 1/2 years.
I think jghorton was referring to the Great Depression of the 1930's.
In any case, referring to the 2008 "event" as a recession is wrong - unless
you buy the government's claim that we are no longer in a "recession."
.... any takers on that ? ...
Depression = recession lasting more than 4 quarters.
There has been a moderating of a continuous economic downturn that
started in 2008. There has been no recovery. This is a depression
and it has been going on for the past 3 1/2 years.
If there was a "like" button on your post I would have clicked it!
The Great Recession was caused by greed, magnified by easy credit.
The greed came from...:
1. ...Institutional investors who didn't like the 1% returns they were getting on money market accounts, so they sought "safe" investments like MBS's, which were returning over >6% and were AAA rated just like MMA's were.
2. ...Banks who capitalized on #1 by selling MBS comprised of garbage mortgages.
3. ...Home buyers who had no savings, no down payment, and who bought a house when they really should have been a renter... all because they were afraid they'd miss the boat.
4. ...Real estate investors who, thru easy credit, thought they could perpetually leverage themselves to become multi-millionares.
5. ...Lenders that were willing to lend to anyone because no matter how bad the borrower's credit, the lender knew someone else would be responsible for the consequences if they defaulted (related to #2)
If there was a "like" button on your post I would have clicked it!
Sheshells, there is! Its the "rate this post positively" on the bottom left. Its very much appreciated when you do this. See the count by your name? You have had 4 as I post this. We all start out with 10. Enjoy City-Data, and welcome.
Josh, I would also add that those same home buyers that shouldnt have been able to buy a house, then used that same home as a atm machine.
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