The Market: 2007 housing collapse

It is important to understand what occurred in our country during the housing collapse. This financial information for my fellow Bearkat guys and gals will be very helpful in understanding other realms you come across throughout your busy day. This past year has been a huge gain for the strength of the U.S. dollar. Currently overseas in Europe, there are major problems with Greece and Switzerland. Both of their governments and economies have taken a huge hit due to massive amounts of debt and their central banks not supporting their own currency.

What I mean by this is Europe is having to bail itself out just like the United States Federal Reserve did in 2008 due to the housing crisis. Our country has gone through an era in which deregulated congressional reforms allowed credit agencies and banks to gamble with our deposited money on over-the-counter housing securities.

As you all remember in 2007, the stock market and the economy tanked. This was not because companies were losing money on their own from poor sales or even because of weak job market. It occurred because a majority of the money on the banks’ balance sheets were tied into contracts and insurance packages that were based on families paying their house mortgage or defaulting.

The federal government had no regulation on these securities that banks and Wall Street created out of thin air. They literally said to themselves, “Hey! Why don’t we bet on who is going to not be able to pay their mortgage and sell these toxic things to America?” No joke. This is what they did. Congress passed the Frank Dodd Law regulating this market of securities to prevent further future damage to our economy.

If you ask me if I feel our economy has recovered, I would say partially. One thing that has to be noted is that President Barack Obama claims our economic recovery has been due to the unemployment rate lowering.  His facts are almost correct. One major note he has not told the public is that the majority of the employment growth came from our state. Yes, Texas. Texas has increased almost a million new jobs since 2007. That is why our unemployment rate has been steadily decreasing. If Texas was taken out of the picture the unemployment rate would have risen. So when you see news involving unemployment, look into it. Do not just take it all for what it says. That will hurt you in the long run with anything.

Now back to the housing mess, Bearkats. Banks that you put your money into from work and savings in order to use on a daily basis was gambled with on housing securities tied to whether people were going to be able to make their housing payment or not.

If you remember, it was a trickling effect that had almost no end in sight in 2007. It was a rough period of time, all caused by the banks who gambled and lost. Not only did they gamble and lose your deposited money, but they also lost money borrowed from our government and other banks. The financial chaos that ensued is a major lesson for everyone to learn from. History repeats itself for a reason. Greed along with money is usually not a very good thing when put into people’s hands who do not look into the future about possible consequences.

As I trade a company’s stock, I make sure I check to see how much debt they have and how much of that debt is payable. A business is sustainable and profitable only if it can pay off debt and keep customers happy. Your banks did not do this. Remember that.


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