The Financial Crisis, what’s going on ?

You only need  to type  that in a search  engine and by the number of hits you  receive, you can determine  just how  deep we are in, and  people are worried. On Google, in just 0.08 seconds, 8,280,000 eight million, two hundred and eighty thousand hits on this topic. We all want  to know if not the way forward, at least an understanding of  the current  situation.  

Many theories  have arisen as  to what might  be the course, and some experts  have   been heard nodding their heads saying- we told you so-  This is certainly  the wrong  time  to be acting  self  righteous   

The effects of  the financial meltdown are  being felt in every way, consumer spending rate  has  dropped  to a low, tighter credit  and the housing market  has   come tumbling down. 

Financial experts  explain  that the governments are at fault, for  encouraging banks  to lower their  lending  rates. This  bred a big  magnitude  of borrowing  even  by  people  who couldn’t  pay back their loans. A case in  point : the Federal Reserve in US gave  this leeway to banks, which lend out  with little restraint also making quite  some misguided investment.  

One instance  that  brought us here is  the  brazen over pricing  of assets by frauds. Everything seems to be working out, after all, we are buying and selling and paying  a good one  for our assets. But since  the extra pricing has not been created  to sustain itself over  a  long time but rather, it’s a short period strategy which collapses when it has ran its lifetime; usually not very long after its initialization. 

Existence of ‘Junk’ bonds which the governments, as they try to save  the banks, buy  all the bogus bonds from the banks then sell them back in the market and heavy prices. This reduces  the amount of money in circulation, since people will usually run for government bonds with the trust that these are secure. In the long run, these bonds end up hitting rock bottom and all facets involved suffer. 

Currencies have lost their value  and investments that were viable at the start have lost their value , now their owners struggle with the indecision of either selling  them off or keeping them and wait until things improve, even as they face  the risk of losing out. 

The reason for this is the trend of using banking money to fund the economy. A vast economy cannot be supported by banked money, it needs to come from other sources that can with stand a melt down , and if investment  was made in these stable resources , the banks  would be smiling as  they assist the governments  in restoration. 

There is  a  lot of government bail out, especially in the USA, where they have adopted a  $700 billion   bail out plan,  by buying all even as  they continue  to get loans  from Japan and Saudi Arabia, the later having unassumingly sailed  through without much trouble even as the rest of the world feels  the crunch.