Finanacial Crisis

The US financial crisis, which started last year, is getting worst and because the world is quite dependent on the US economy. Now that major companies such as Freddie Mac and Fannie Mae needs to be bailout. Lehman Brothers, a company that survived the Great Depression, just went bankrupt, and everyone around the world is panicking. Many believe that what is coming is worse than the Great Depression. Does it mean whatever is up coming is worst than the Great Depression? Alan Greenspan said it himself that this is the worst crisis in a hundred years. What's going to happen now? At a crisis time like this, the Presidential Campaign is more important than ever.

Most people believe that this started with the subprime mortgage last year. But since the beginning of 2005, the US housing bubble has been building and investors and economists back then had already warned that this was going to happen. People in the US get their hands on cash too easily. All they have to do is go to the bank and borrow money. The banks are suppose to check if their client have the ability to pay back their debts before they lend out their money. If they believe their clients do not have the ability to pay back their debts, their clients can’t borrow any money from them. Even if they believe if their clients have the ability to pay back their debts, the banks still require an asset of equal value collateral. The problem here is that the banks in the US, as according to some analysis, is that they have made money too easily to be borrowed. People have a lot of cash with them, they spend it but now they can’t pay it back to the banks. The banks lose a lot of money and that is what it seems to be happening now.

The American general public is also suffering. This is due to inflation. The prices of many goods and services have risen and people are having trouble paying for them. Small businesses are having trouble keeping their doors open because the expenses have become too high. There have been criticism and protests that the US government’s bailout plan is only for the rich Wall Street companies while “mom and pop” business have to suffer. Present George Bush’s response was, however, that this was essential.

Despite the efforts, many have already lost their confidence in the US economy and are well aware that it is going into a recession, and quite possibly, a depression. Is it going to be like the Great Depression of 1929? Is this history repeating itself? Or will the economy pull it off? And what's going to happen to us now?