I don't remember much - but I do remember England being swept up in the after effects of 87's Black Tuesday and millions of homeowners ending up in the dodgy financial situation of having negative equity.
They'd borrowed thousands to purchase their homes - and the sudden plummet of the housing market left them owing far more then they could ever recover even if they sold their house.
It was a pretty sticky situation and should have taught us all an important lesson.... But instead, America's teetering on the brink of a similar recession right now.
The culprit? The sub-prime mortgage industry.
In order to 'clean up' a potentially lucrative corner of the market, greedy banks like Merill Lynch and Citibank have been offering fantastic mortgage packages to slightly shaky customers. Huge loans that left the borrower struggling to make the monthly repayments.
The gamble could have paid off - but throw in plummeting house prices and sky-rocketing inflation and the 'on paper' profitability of the sub-prime market has suddenly turned into a slew of foreclosures and bankruptcies.
So instead of cleaning up on the sub-prime sector, the mortgage gambles have cleaned the banks out. Merill Lynch posted 14.1 billion dollar loses this quarter just a few days after Citibank wrote down almost $10 billion.
And the result?
Thousands of layoffs - some people speculate the after-effect of Citibank's disastrous losses could see as many as 29,000 people unemployed.
More foreign bail-outs - leaving more of America's industry in the hands of shadowy middle-eastern investors.
It's a very unhappy picture and the skyrocketing inflation and miserable financial outlook has left America on the brink of a recession - which will likely drag the entire world economy down with it.
What have we learnt?
Apparently, nothing.
I'm no economist, but I can't ignore the fact that Black Tuesday and this recent scenario came on the coattails of two terms of Republican presidency.
President Reagan was occasionally blamed (either rightly or wrongly) for contributing to 87's stock market crash through 'Reaganomics.' He turned America from the world's largest international creditor to the world's largest debtor nation, increasing the deficit to a whopping 3 trillion dollars.
President Bush turned a surplus of $86 million into a deficit of $434 million and increased America's national debt to just under $9 trillion dollars.
Wouldn't it nice to have a presidency that ran the US Government more like a responsible housewife than a sailor on shore leave? To spend only what they could afford to?
If somebody hold told the sub-prime borrowers to think seriously about their financial situation - or not been dumb enough to lend them the money in the first place - perhaps this inevitable disaster could have been avoided.
I saw it coming - and I'm not even an economist. You have to wonder what those well-paid pundits on Wall Street were thinking when they gave the thumbs up to a clearly ill-considered project like plundering the sub-prime sector.
The ripples made by the sub-prime splash are likely to effect every American - and for some time to come.
Every time a Republican candidate goes on TV and extols the wonders of 'Reaganomics,' I have to wince. The Republican party is meant to represent 'small government' and fiscal conservatism. Instead, every Republican presidency in the last 28 years has represented the complete opposite.
1 comment:
You miss one large fact. Both Republican presidents were fighting wars.
Reagan the cold war. Bush the war on terror. Had Clinton done his job we wouldn't be in Iraq because 9/11 would have never happened.
Common strategy:
War Budget - Run in the red.
No War Budget - Run in the black.
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