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Economics

I can’t write from a position of authority on the current economic state of the country, what I can do however is pretend to write from a position of authority on the subject.

I also know that everything that follows will subject to the disbelief of my readers based on the sentence that preceded. What else can I do? My understanding of what has been happening in the recent days is based on the very few articles that I have skimmed over in the newspapers, radio talking points and news briefs, and discussions on some political talk shows. None of it has been too in depth, and while I can’t get my hands on a new issue of the Economist just yet I will make an attempt to explain what seems to be the problem at hand.

First off we have the cause. From what I understand, it seems that the various economic institutions tried to take advantage of an economic bubble. Much like they did in the 90s with regard to the Dot Coms, only this time it was real estate. It seems to be based on the flexible low mortgage rates that the banks were handing out to anyone that asked. Then those rates went up and instead of handling the problem internally the banks sold the debt to third parties who went into hock to buy them with a higher interest rate. Any debt that could be sold was, leaving the banks more money to hand out in which they eventually sold again. Thus the cycle went on.

Then there was the “short selling” of stock. This is a practice by which people sold stock that they didn’t actually own in order to drive down the price so they could buy it at a reduced cost. How the hell this worked, or was even thought of, is beyond my comprehension. While I haven’t directly read Adam Smith’s “Wealth of Nations” I have read enough academic commentary about it to understand that this isn’t how free-market capitalism is supposed to work.

You can’t sell something you don’t own–unless you are a con man in which case there is a whole other problem going on. Is that what the Wall Street brokers can be classified as? This practice has brought down a couple of investment houses (think Trading Places with Eddie Murphy and Dan Akroyd) which then have received bail outs from the federal government. Or, they are being bought up by foreign interests.

In the case of the former it is interesting that his sort of socialist involvement by the government would be happening. The current administration struck down the SCHIP funding (State Children’s Health Insurance Program) because it was expanding into a form of socialized health care but then it thinks nothing of doing the same to the banking system. Is it because programs like SCHIP help the lower classes while the banking industries’ leaders are in the upper classes. I’m not a Marxist or a class warrior but this might be too hard to ignore.

Having never taken an economics course it’s hard for me to understand how this works and more importantly what the long range effects are. I have no serious outstanding debt so I can’t think that it will directly affect me. Will it indirectly affect me with rising costs? Is this situation more than just something that the monetary elite must endure? Or am I like the person who doesn’t vote, rationalizing to myself that the problems are so distant that I can’t make a difference so why should I care? I don’t have any answer to those questions, but I do know what I will be looking for next time I’m at the library.

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