Tuesday, April 7, 2009

A Simple Explaination To The Current Economy Crisis

Everybody on the street is talking about bad economy. But less than half of them really understand what causes it. And today, with some stolen knowledge from youtube and my friends, I am going to prove to you how someone can learn a lot with the internet.

In layman's term:

First of all you should understand that the US is one of the biggest customer in the world. It created a lot of business opportunities for other countries when it buys things from them. So one day, the US economy decided that it is going to collapse and in return, all the other countries lost this valuable customer. So they too collapsed.

So the better question here now is "What the hell happened to the US economy?"

The story began like this, many years ago, when people got married and wanted to start a family. The first thing they wanted was to buy a house. But most of them did not have enough money to buy, so they had to take a loan from the banks. So the banks lent them the money and charged them interest, if they however fail to repay their loans and interest, the banks will take away their home and resell it. As the prices of houses were always increasing, this sounded like a perfectly nice idea.

When everything were going just nice, the banks decided that they wanted to make even more money through loans or better known as mortgages. So they hired professional people like me to give them ideas. One day, I suggested to them "HEY, WHY DON'T WE ENCOURAGE MORE PEOPLE TO LOAN MONEY FROM US, THAT WILL INCREASE OUR PROFIT!" My boss replied "AND HOW THE F@#K ARE WE GOING TO DO THAT?". And I replied "WE CAN MAKE LOANING MONEY EASIER, WE SET LOWER CONDITIONS LIKE NO NEED DOWN PAYMENT, NO NEED GUARANTOR, NO NEED PROOFS OF INCOME AND ETC!". My boss heard it and decided that it was a good idea. He then did accordingly to what I suggested and rewarded me with a 500 million paycheck so that I may live happily ever after.

So when the bank started to loan money to just anybody regardless whether they can pay back or not. It turned out that some of them really could not pay back. So what the banks did were they took the houses of those who couldn't pay back their loans for resell. At first it was okay, but many years later in 2008. More and more people were not able to pay back their loans. So what happened was that the banks got more and more houses for resell. So much so that the houses they had exceeded the demand of the market. They had too many houses but too little buyers and the houses would not sell. When that happened. . . . the unseen time bomb suddenly went BOOM! The prices of the houses started to fall sharply. For example a house that used to cost 300,000 is now worth let's say 75,000.

To make matters even worst, when the prices of houses started to fall, the good people who were regularly paying their loans to the banks started to wonder if it is still worth it they pay the bank so much interest. Since their house now has such a low resell value, if they don't pay the bank back, they can easily buy another house with the money they have." So finally they decided to abandon their houses.

This brings us to a situation where the banks are having a loooooooooooot of houses with no resell value. And to make the worsen situation even f#@king worst, the money they lent to the public at the first place were actually money they borrowed from multiple investors. So now you see a chain reaction between "people who don't pay their loans", "the bankers" and "the investors who invested money into the banks". In this situation, the money flow started to freeze immediately and there were only shit left. So in this difficult time, they once again turned their backs to consult professional people like me and asked for my advice. After a lot of thinking, I've decided to advise them the best way out of this mess -------- Go Bankrupt! And that was the day you heard the Lehman Brothers closed shop. Welcome to the Economy Crisis. The United States is still in a 15000,000,000,000 debt. That is 15 trillion.

To understand the whole situation in a more detail picture, these are the best:


vrempire said...

That's a very simple and easy way to describe it bro. You can be a good and favourable lecturer in Economic class :)

Andrew Ho said...

Thankx xD

Anonymous said...

HUhu...good explanation =)

Su Ee said...

Nice one, Andrew! =)

One request:
Can you post some pharmacy stuff next time? Might help in my exam.hehe..

amirmukhtar said...

Crap! I've gone cross-eyed!

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