There was a monster financial institution called Bear Stearns. The company was worth $350 billion on paper, and the price of its stock was $170 per share. It made money the old fashioned way, by loaning money to financially strapped consumers at confiscatory, usury rates of interest.
It bundled millions of “subprime” loans together for sale to other financial institutions in Europe, Asia, and the Middle East, and they also made big money by enticing consumers into a state of financial servitude. The set up was brilliant in its elegance. The same multi-national corporations in Asia and Middle East that were helping trap American consumers in deep debt with high oil prices and container loads of crap shipping to Wal-Mart, were also enjoying huge profits by financing the very same debt they created.
One day, the axe just fell. Similar to the S&L crises in the American Southwest during the 1980s, the value of home prices fell. Overburdened, overwhelmed consumers mailed in the keys, and simply walked away from their debt. In a relatively short period of time, they will be able to rebuild their credit and rebuild their lives. In the meantime, there are millions of low cost houses available on the market.
So America built millions of houses and purchased millions of automobiles and millions of wide screen hi def TVs, but who paid for all of this stuff?
The answer is the share holders of financial institutions like Bear Stearns. Many of these corporations are headquartered in America, but a surprising number are located in Asia and Europe.
When economists describe America as the economic engine that drives the world, they’re not exaggerating. The problem is that this week, the world got punked.
by
KenTX on
03/18/2008 01:26:54 AM EST
[
Parent ]
