Order of Events for the Economic Disaster of 2008

Order of Events for the Economic Disaster of 2008

Everything was fine until the price of houses started to decrease (saturated market). The order of events that I see were:

1) House prices start to drop.

2) Drop in house prices triggers Sub Prime loan defaults. With rising house prices, even Sub Prime defaults did not mean much since the house could be resold, but when the house could not be resold, the mortgage payment stopped.

3) Sub Prime defaults causes Investment Companies, Fannie and Freddie to go bankrupt (government takeover) because potential loses where greater than assets.

4) Dropping house prices dried up capital so people stopped spending.

5) Reduced spending caused the stock market to drop.

6) Drop in Stock Market triggers the credit default swap crisis where AIG may owe an infinite amount of money on the insurance policies for stock price drops. A lot of people are expecting AIG to come up with the money to cover the stock loses so there is another shoe to fall when AIG cannot pay.

Now both the real estate market and the stock market are worthless.

Now, no one will purchase anything because the price could drop more or they just do not have any cash. No one will lend money because the only people wanting loans are those that have a poor credit rating.

The concept of government spending their way out of this mess, will probably cause the worst inflation that has ever existed.

The two major mistakes were:

1) House prices will always rise.

2) The stock market will never drop more than about 20%

There is an old saying, "The road to hell is paved with good intentions". The CRA was intended for good, but it was based on hope and not reality.

Democrats tend to base policies too much on hope and Republicans tend to base policies too much on reality. I believe President Bush made the most honest attempt by any president to bring hope and reality together, but that caused both the democrats and Republicans to hate him.

I believe the CRA was one of the many programs that have been attempted to bring equality to blacks in America. I believe the black inequality problem is not economics but rather the Village Family Concept that is totally opposite to the Christian Family Concept of a man, woman and children family where the man provides the resources for the family and the woman natures the family. The Village Family Concept accepts illegitimate children that means instant poverty for the mother/child and places the burden of heath care/welfare on the whole nation.