The mess we're in

[Yooper67]

It's not a Bush problem or an Obama problem. Is is the result of an ENRON-like consumer and credit culture that should have never existed in the first place that went on for years.

This current crisis is because too many people lived beyond their means for a LONG time now. Too many bought houses and borrowed money they could not afford to borrow. Lenders, such as Countrywide loaned money to people they knew damn well they couldn't afford to pay back the loans. As far as I'm concerned, Countrywide is in the same category as ENRON was. The easy credit happened on such a wide scale that when this whole facade of artificial money finally fell down, it took everything else down with it.

A three-headed monster of easy credit artificially created the economic growth from about 2003-2007: on homes, cars, and revolving credit.

Home loans were available to nearly everyone without even income verification required in many cases. ARMS taken out in 2004 and 2005 began to reset en masse in 2007 and 2008 and people couldn't pay back the loans. Foreclosures shot up, banks didn't get money paid back, and the frequency of this started to affect property values. Meanwhile years of credit cards for the asking and people maxing out their credit cards buying flat screen TVs and vacations they couldn't afford. Even people with poor credit were getting pre-approved Mastercards and Visas in the mail with $5-10L credit limits. Can you say SHOPPING SPREE? This directly contributed to the explosive growth at places like Best Buy, Home Depot, Macys, etc between 2000-2007.

Not only did the "credit cards for the asking" increase sales at these places so did the "home equity lines of credit for the asking" that were all the rage in these 5 years amid the rapidly escalating real estate values. People bought cars, campers, pools, vacations, you name it with these home equity lines of credit. 2nd and even 3rd mortgages were commonplace.

Zero down, 72-month loans, and no credit check were the norm for new car buying. People who had 2 ARMS on their overvalued house and maxed out credit cards went to the dealership and signed on a loan for 72 months on $40,000 SUVs. You could walk into a dealership, exaggerate your income, and walk out with an Eddie Bauer Expedition. Millions did it. 72 and even 84 month loans!

Same with jet skis, campers, snowmobiles, motorcycles, etc.

Also common were the "no payments for one or two years" at furniture stores, electronics stores, etc.

It all appealed to the American culture of instant gratification...instant now! "Screw what my parents said about saving up for something you want." Just take 5 minutes, fill out an app, and walk out with your 60" TV.

All of these easy sources of credit for everything ranging from homes to cars to TVs to even vacations propelled the economy to new heights as sales shot up and real estate values skyrocketed. In the meantime, gas remained cheap despite explosive growth in demand as everyone got on the road in their mammoth SUVs.

But eventually the easy credit dried up.

1. ARMS reset and people couldn't pay their new higher mortgage payments.
2. Banks lost millions on bad loans and had to begin to restrict lending.
3. Real estate values began to decline due to a combination of more foreclosures and lower demand due to tighter lending criteria.
4. This credit freeze spread to consumer credit, such as cars and credit cards.
5. Because of real estate values declining, home equity loans began to drop precipitously.
6. The end of easy credit impacted sales of motor vehicles of all types, flat screen TVs, luxury vacations, etc because it eventually reached the point where only people who a) could afford them and b) needed them were buying them.
7. Fuel prices skyrocketed, making people stop buying trucks and SUVs and those saddled with 72 and 84 month loans on the ones the purchased back around 2003 or 2004 just let them get repossessed because they were so upside down in them.
8. And now 1 out of 5 Americans owes more on their mortgage than its worth...because the artificial real estate bubble pumped up by years of easy credit has popped...and the only smart thing to do for some of these people is to just walk away from it.

Being the world's largest consumer of everything, from bricks to BMWs, the end of easy credit and the resulting drop in sales has reverberated worldwide.

Our economy was artificially pumped up by ridiculously easy credit from around 2000-2007. Now the bubble has surely burst and now the economy must clean itself up from all the years of fiat credit that it absorbed and adjust itself back to the solid fundamentals. Trillions of easy credit and inflated real estate dollars are now absent from the economy. Bailouts won't fix it. The economy will heal itself--quicker if the government would just stay out of the way.

All the Chicken Littles are coming out like they do every time there is a crisis in this country. This forum is evidence of that, as is some of the media and much of the garbage infested Internet. The world is ending, they say. America is doomed, they say. Doomsayers are part of the problem because they feed the negativity and inhibit real solutions to the real problems. In short, they waste their own time and everyone else who are stupid enough to listen to their crap.

In reality, the easy credit has ended and now we must get used to again buying things we can actually afford and living within their means. To me it sounds more like a new beginning. But we have some rough waters to sail as we get there. America is in very bad shape right now my friends...but we will make it, when it’s all said and done.