Posterous theme by Cory Watilo

Financial Meltdown

 

Some people are bitter
That stock markets failed
But prices have backtracked
So me, I'm just swell

Cuz fat cats are out on the streets
I'm buying now! (Buying now!)
Cuz stock brokers Porche's really cheap

The financial meltdown
Financial meltdown

Ooo-oh! I look like a genius!
With no investments at all!

My rent is still peanuts!
As house prices fall, yeah!
With so many condos sold
And gas prices down! (Prices down!)
My comic fort's ???? about to grow!

The financial meltdown
Financial meltdown

IT'S FINANCIAL MELTDOWN
WE'RE ALL BROKE TOGETHER!!!!

(Unfortunately I was unable to find the the actual lyrics to the song, so I am relying on flashn00b's transcribed lyrics.)

The Financial Meltdown is a parody of a very famous song The Final Countdown, by the Swedish band, Europe. The modern parody of the song is an accurate depiction of the financial situation faced by the world. The song goes from the collapse in the housing market to the fall in oil prices. It also does not fail to overlook the insecurity of the very unstable investment market, which crumbled with the collapse of the major investment banks (Bear Sterns, Lehman Brothers, etc.). Overall this song portrays the view of the average person, who has to endure the treachery of the financial crisis.

 

 

Globalization: Exploitation of the Undeveloped World

            The American dollar is the world currency; it is accepted everywhere and anywhere. This currency has a major flaw to it though; it is not backed by anything other than world wide confidence in the American economy. This same confidence in the American economy allows them to accumulate vast amounts of debt, which will never be paid off. Unfortunately the rest off the world does not enjoy a limitless supply of money. This is especially apparent when the World Bank, and developed countries, authorizes loans to undeveloped countries, with interest rates that will keep the country forever tied to the developed world. This allows developed countries (DCs) to exploit the debt they have forced the undeveloped countries (UDCs) into doing whatever it can to pay off the debt. Thus the money made in the UDCs economy does to the DCs economy, restricting their economic expansion.

 

            The modern developed world has almost dehumanized the lived of those living in UDCs. The populous of DCs is constantly told that hard work leads to success, and economic expansion is best for all, while in reality, it is best for the upper class, but horrific for the lower class. The lower working class works the hardest for their money, yet in UDCs their inefficient, reliant, in debt, economy puts a lot of the money made from their work into debt reduction. Government services take a second seat to debt reduction, therefore the people suffer. Of course if DCs governments were to show the people suffering because of the UDCs debt, then the general populous would demand the government to forgive the debt.

 

            The money lent to UDCs is poorly spent, and rarely benefits the UDC. This is because the money is put into infrastructure projects, which in theory is a good idea, but in reality, it just gives money to international construction firms. Also they design projects that hurt the lower class and indigenous people. These projects only help the rich in the country, while harming everyone else, severely. Many homes and agricultural land is unusable because of these projects.

 

Though exploiting UDCs is great for our economy, and our style of life, it hurts the poor people in the world. In the past few years the gap between the rich and poor has more that quadrupled.    

Sub-Prime Mortgages continued...

Sub-prime mortgages not only affected those who partook in the risky process of lending the money and borrowing the money, it also affected the investment bankers. Before the sub-prime mortgage problem occurred, it was common practice for investment bankers to buy mortgages, bundle them up in what are called Collateralized Debt Obligations (CDOs), and then sell them to outside investors.

 

During President George W. Bush’s tenure in the White House, he provided a tax relief to home owners. This sparked a massive increase in home ownership, along with an increase for loans from banks. With a massive increase in home ownership, along with the foresight into potential profit to be gained from the loans, banks started to offer more sub-prime mortgages to the masses.

 

Investment bankers became to include sub-prime mortgages in their CDOs that they sell to outside investors. To combat the risk taken on by buying these CDOs, these investors took out large insurance policies on the CDOs.

 

The massive increase in ownership caused an artificial increase in property value. Eventually, sub-prime mortgages began to default and the housing market collasped. Since some sub-prime mortgages were included in some CDOs, the CDOs soon became worthless. Investors in these CDOs lost a vast amount of money. Furthermore, the insurance agencies “protecting” the investors who bought the CDOs could not live up to their obligations. They would end up losing vast amounts of money as well.

Sub-prime Mortgages

The economic crisis of 2008 was largely created by sub-prime mortgages. A sub-prime mortgage is a loan given out a person who is not the ideal person to be eligible for a conventional loan, so the lender a taking a great risk in giving this loan. This is because the borrower may default on the loan. To combat this risk of defaulting on the loan and the lender losing a lot of money, the lender charges a higher than normal interest rate on the loan.   

 

In 2008 the hammer came down on the lenders, their borrowers started to default on their loans. A huge bubble burst and money a substantial amount of money was lost by both the lenders and the borrowers. Economic crisis ensued after the bubble burst.

 

 

Us_debt

(This graph shows the growing amount of sub-prime mortgages taken out from 1980-2004. This graph clearly illustrates the bubble forming by theses mortgages.)

Death of an Era; Europe's Failing Economy

(download)
The market crash of 2008 was the worst possible event to occur for economic hit men around the world. Money was running tight; therefore countries put their own interests in front of others. This progressed to a point in which countries were more focused on the security of their own economic situation, pushing away from the model that increased their economic empire.

 

The power of the United States’ economy became clear, the world was so closely tied to them, that their market crash affected everyone. The work of the EHM years prior to the crash guaranteed the world would feel the full extent of an economic crash in the United States. The USA’s economy did not just crash; it imploded, pulling everyone done with them. No country was safe from the crisis; the bonds to the United States economy were too great to overcome.

 

These bonds are most prevalent in Europe, as the region’s currency was soaring during the prosperous economic times, but when the tide turned, the Euro started its fall. The Marshal Plan (to give Europe money after World War II in order to help rebuild their economy and to help stop an economic downturn after the war) is a prime example of how Europe tied itself to the USA. Now with the currency failing, desperate measures are being put in place. Europe is deeply concerned because if one economy fails in the region, then the whole region fails. They are trying to appeal to the only developing economies in this era, India and China, for bailout money. This money is essential to the success / stability of the region.

My New Book!!

Andrew Ross Sorkin delivers a stunning moment by moment account of how the greatest financial crisis since the Great Depression occurred. It extends from the office of Lehman Brothers, to meetings around the world, and in the most influential capital city in the world, Washington. To Big to Fail tells the gripping story of ego, greed, along with how the most powerful people in the financial and political world determined the fate of the world’s economy with their successes and failures.

Faking Economic Growth

"Thanks to the biased 'sciences'of forcasting, econometrics, and statistics, if you bomb a city and then rebuild it, the data will show a huge spike in economic growth." page 256-257

 

There are two sides to this statement made by John Perkin; one side suggests that only short term econmic growth can be achieve through this, the other show exampls like Germany and Japan as countries that have been bombed to the ground, rebuilt, and how become two huge economic powers.

There is also a catalist present in making these statistics; how important is that country and its resources to the United States. After World War II, The United States wanted to avoid another econmic collasp. They recognized Germany as being a key economy in Europe to keep stable, since it is right in the middle of Europe. They also wanted to avoid Germany becoming communist. In order to build up Germany's economy and stop the spread of communism the United States executed the Marshall Plan. The gave a sustantual amount of aid to Europe and rebuilt their economies.

Modern day Germany is one on the 8 largest econmies in the world. It is also miles ahead of all of its European competitors, being the best economy in the European Union.

The reverse of can be said of Vietnam though. The Vietnamise economy is struggling. The country lacks any resources that are important to the United States. The only reason the United States invaded the country was to "stop the spread of communism". The mass Hysteria created by the US government allowed them to gain support for the Invasion. Support was eventually lost though. After years of fighting, combined with a high casualty rate, the US people began to turn against the government'e efforts in the war.The US military eventually left the region and have sent a very small amount of aid to the devestated region.

Iraq's Terrible Irony

Ever since the US started their occupation of Iraq, the Iraqi people have been suffering. They have been suffering in many ways, but mostly finacially. This is because the war being waged in their country is being paid for by the Iraqi people. Money made from their vast oil reserves goes directly to the US army and into the US economy. This has a major backlash to it though, as the economic growth of the Iraqi people will be severly restricted due to these payments. Money will not stay in their economy to stimulate it.

Calling on the USA's Debt

The United states has a national debt exceding 14 trillion dollars. The debt increase by 1 million dollars a minute, yet no one will ever make the United States pay up their debt. The reasoning behind this is because the United States has a GDP of 14 trillion aswell, along with the largest military in the world. Calling on the United States debt would crash their economy aswell as the worlds. Furthermore the United States would most likely take military action against that country. Lastly the United States does not have their currency back by gold, but rather world wide confidence in their economy. In conclusion, making the United States pay up their debt is a terrible idea.

Middle - East's GDP per capita

Qatar $93,204
UAE $54,607
Kuwait $45,920
Israel $28,365
Bahrain $27,248
Saudi Arabia $19,345
Oman $18,988
Libya $16,115
Lebanon $7,617
Iran $4,732
Algeria $4,588
Tunisia $3,907
Jordan $3,421
Iraq $2,989
Syria $2,757
Morocco $2,748
Egypt $2,161
Yemen $1,182

 

 

The GDP per capita in the Middle ast has a direct relation with the amount of aid given by the United States. Quatar and UAE are two countries that are heavily financed by building corporations, in a to make a desert paradise.

 Israel recieves massive amounts of money from European and American jews, and in recent year the USA. The USA started to finance them after they showed their military might in the Six Day War. Israel also makes a lot of money off of weapons, as they are the third largest arms manufacturer in the world.

Saudi Arabi makes money off of their vast oil reserves, and is official chained to the USA's economic drive for oil.

Egypt's main industry is tourism. Unfortunately that industry has collasped with the fall of their pro-American dictator.

Jordan has recently discovered oil in the eastern part of the nation,but it is no where near the size of the Saudi reserve. Unfortunately for them, their main industry is tourism, which has taken a major hit after the Egypt crisis.

Kuwait is a nation the has a large oil reserve. This reserve drives their economy.

Lybia also has vast oil reserves. Their oil is traded to Europe for money and arms. To Europe's dismay, Lybia is in the middle of a civil war, which has stopped all trading with them.

 

 

The trend is that the countries that recieve lots of aid form Europe or the US have a higher GDP per capita, while the one that recieve little to none have a low GDP per capita.