Spring Break
Out of control banks means bad news for Americans
Rami Abdoch
Issue date: 11/12/08 Section: Opinion
The United States, as well as several major nations worldwide, are currently in the throes of an economic recession. The past two months have been devoted by the global community to addressing the sources of this crisis. People have pointed fingers at the credit crunch [reduction in the availability of loans], the subprime mortgage crisis [decreased ability of business to fulfill financial obligations triggered by credit markets and banking systems] , and the housing market correction [general downswing in the affordability of real estate] as the main phenomena that are feeding into this crisis. These three in particular decrease the confidence of the average consumer in the economy and undermines the purchasing power of the populations that suffer from these collapses.
The problem in asserting that the problem is the fault of these phenomena is that it distances blaming those who have great influence on the market such as the U.S Treasury and the Federal Reserve. They deserve, at least in part, a degree of blame for the current conditon of the market. These phenomena merely reflect the ways in which the economy has gradually decreased since 2006, but I find that few if any criticisms of the economic crisis deal with these macro-level institutions. People such as Ben Bernake [chairman of the Federal Reserve] and Henry Paulson [secretary of the Treasury] have proposed that an almost $1 trillion dollar influx into the economy is necessary to prevent a catastrophic breakdown - though they did not mention explicitly the scale of this potential breakdown, it is clear the implication was that a Great Depression like occurrence would be imminent unless action was taken. This money has been and is being used to buy up hundreds of bad mortgages that would otherwise fail. Though it is likely that this stimulus will help in the short-term, the problem is a structural one that lies at the heart of our economy: the creation of money as debt.
The problem in asserting that the problem is the fault of these phenomena is that it distances blaming those who have great influence on the market such as the U.S Treasury and the Federal Reserve. They deserve, at least in part, a degree of blame for the current conditon of the market. These phenomena merely reflect the ways in which the economy has gradually decreased since 2006, but I find that few if any criticisms of the economic crisis deal with these macro-level institutions. People such as Ben Bernake [chairman of the Federal Reserve] and Henry Paulson [secretary of the Treasury] have proposed that an almost $1 trillion dollar influx into the economy is necessary to prevent a catastrophic breakdown - though they did not mention explicitly the scale of this potential breakdown, it is clear the implication was that a Great Depression like occurrence would be imminent unless action was taken. This money has been and is being used to buy up hundreds of bad mortgages that would otherwise fail. Though it is likely that this stimulus will help in the short-term, the problem is a structural one that lies at the heart of our economy: the creation of money as debt.
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