What's the biggest problem with our economy right now?
Dependence on foreign oil?
Deficit spending?
Sub-prime mess?
What's having the biggest impact on the US economy and will continue to do so?
Answers
631 points
Creezy answered one year ago …
Can I say, "All of the above"?
I don't know if one outweighs the other, they all sort of work together to create this giant mess we're in.
But if I was forced to pick just one, I'd say the bailout from the subprime crisis. That's going to seriously impact this country for years to come. It's going to make it much harder for Obama or McCain to cut taxes when they want to and it'll make sure we continue this horrible policy of deficit spending. That will in turn keep the dollar weak, which will certainly help out exports but will hurt consumers here at home.
When the economy goes south you'll want to put as much money back into consumers' pockets as possible -- consumer spending makes up 70% of GDP, this is a consumer driven economy -- but with a falling dollar, the government's inability to cut taxes and the threat of more problems with the financial sector in the coming months, I think this economy is in a SUPER fragile state right now.
3963 points
MNSL answered one year ago …
In addition to above:
Higher debt
Too many instruments
Mis mangement in the credit market. Everybody compete each other to provide more and more credit to maximize profits during boom period specially for non productive areas. They will do in the future as well. They can not think about future doom
190 points
HoughtonAndAtkeson answered one year ago …
It's almost the perfect storm of problems -- the extreme of the extreme, if you will.
In this case, we are confronted with the mother of all asset inflation bubbles in housing while almost all participants of the economy are vastly over-levered. We are seeing the destruction of institutions at an alarming rate. Iceland, an important European banking center like Switzerland and Morgan Stanley (MS) appear to be two of the most recent examples.
As is always the case when fear mounts and wealth is destroyed, we transition from waking up to the problem late to believing the problem will never go away. The pendulum has swung.
Market experts have moved from talking about buying the market on valuation to explaining how the "credit supercycle" will take many years to unwind.
If you play the odds, however, this time may have different root causes but the market will respond as it has every time during the 12 recessionary periods since the Great Depression. If we use history as our guide -- rather than fear -- the market is currently extremely oversold.
474 points
spider348 answered one year ago …
Oil is oil and we need it regardless of it's orgin.
Deficit spending doesn't help.
But is was the Sub-prime mess that got us here. The federal law that was passed a few years ago to allow banks to invest their customers funds in risky investments such as sub-prime mortgages, etc. caused this landslide. So, banks have not more to loan or if they do it is tightly restricted. So, businesses cannot borrow to survive or grow. Then the company stock price takes a hit because nobody want to be part of a company that is shackled and cannot grow. And here we are...
104 points
Laine answered 9 months ago …
The house loan and the payment!
Thats the biggest #1 junk !
The reason
-people are buying the big house that they cant afford and once they used the loan and the house payment went up and after they decided to live in the house for 2 years then sell it. They get lots of money which was a smart way to do it.
-now because of the loan its really high now and when people buying big house they cant afford, the loan iz like way up ^ and the house payment iz like way down and they cant afford to pay back the loan and cant sell the house if cant afford to pay back.
Its really a disaster! and I am only a 15 year old gurl. My dad explained it all to me today and I waz arguing all about it saying its the loan thats really High^ and they shouldnt do that but the truth iz The bank should have thought about it and the people they knew it waz going to happen and its the way it works. whoo i feel better now explaining it! lol
