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smith
Joined: Sep 18, 2003
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SOME REASON FOR THE FINANCE CRISES
October 27, 2008 - 10:25 AM
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Super normal profits were made in housing/mortgage sectors and quickly money was withdrawn from such areas. It was quick huge withdrawal. This recreated a vacuum; to offset the crises you need to balance it.
2. Elections, the US elections are part of the cause. Major Consumers are not willing to spend, only the few rich. They are all speculating who will be the president before things will become normal again.
Consumer behavior has changed because there access to cheaper resources and the realization that certain things, such as luxury can be ignored for a while. It s from this view that is why consumer are not willing to buy.
Scenario
One morning, the some major capital investor of your firm decides to freeze his capital from your business, to study the market before unfreezing and investing again, you can continue to run the business but you don’t why?? Because you have the fear that should you make any loss during any of your transactions, your own capital is not insured or safe and you might lose. You cannot touch your frozen partners capital with you, similarly the bank will not give you loan because it’s the same scenario there too.
Steps you will take psychologically:
1. Cut down spending on personal items like parties, outings, luxury dresses, fuel, foods and beverages and become time conscious.(mostly entertainment)
2. Cut down office expenditure on transportation, minimize communication by phone and increase internet usage to save time depending on which is cheaper. Using the TV news, internet and reduce news paper purchase as well as luxury magazines and fashion.
3. Doing maintenance in the house yourself than by the agency.
4. Cautious to trust anyone because of difficulty in access to money.
5. Gifts have been reduced; women receive most but now they are not receiving the same percentage again making them cautious to spend.
6. Economies which provide inputs (raw materials) are developing some at source therefore it becomes more expensive to produce as compared initially.
These are very little in aggregate but when put together, commands the purchasing power of consumers to be willing to spend thereby increasing the level of capital and confidence in each economy to stabilize the world market.
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smith
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Re: SOME REASON FOR THE FINANCE CRISES
October 27, 2008 - 10:30 AM
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add your findings
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Zohal
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Re: SOME REASON FOR THE FINANCE CRISES
October 27, 2008 - 03:21 PM
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Well Smith you are very right and I agree of what you said as this economic down turn which is suspected to happen to hit all the world specially the poor countries. So I am become affraid even when I am thinking of the poor countries after all this.
I think the main reason for it is the very low interest rate by FED this made it enable for people to buy more houses with a lower price considering it as an asset so the banks issued the mortgage load to the people who couldnt afford it. These mortgages payments rates of many so called ARM (Adjustable Rate Mortgages) were set to increase - without the debtor knowing. So people couldnt afford the mortgages any more and those who bought it came to realize that the bundle they have bought is worth of nothing.
Now how to control it. According to some economist the direct government spending in some selected banks can help to reslove the issue.
well lets expect the best.
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smith
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Re: SOME REASON FOR THE FINANCE CRISES
October 27, 2008 - 05:02 PM
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ZOHAL, thanks for the explanation, that will sounds like.
i bought a house for 10,000 USD on credit with interest, after one month without the knowledge of ARM, the ARM is used, my house is now rated at 2000 USD whiles, i have not finished paying for the debt and interest on the house i bought and it has just devalued,
the question now goes;
Who is to loose that gap of money? or who should incur such loses?
i will delay payments or be in debt. this is because i cannot sell the house, neither can i say i will not buy it again ....?
reversal approach is the best. the ARM should be used again to bring value to those housing again rather than the spending...
revalue to the last point of ARM and still get the thing back to its feet. eg
ARM is used again then the house now cost 9,000USD fine, close sales on housing and deal with consumer confidence in the economy once again
Pls, give me the perspective if am wrong....
This post was edited on: 2008-10-27 at 05:04 PM by: smithswork
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Fred Amese
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Re: SOME REASON FOR THE FINANCE CRISES
October 28, 2008 - 05:37 AM
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if a man opens his wallet into his head, nobdy can take it away from him
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smith
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Re: SOME REASON FOR THE FINANCE CRISES
October 29, 2008 - 03:11 PM
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u can take show him more money for discussion
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