Monday, October 5, 2009

Boom or Bust?

Remember in 2005, when everything was going gang-busters; unemployment was very low, work was plentiful, people were shopping and buying, the economy was booming, the stock market was making people rich, home prices were rising giving people equity for the future?

It seemed that everyone was doing good with one exception, people who were not homeowners were finding it harder to buy a starter home.

What was the official response? Our government and the Feds kept telling us the "bubble" was going to burst. Did they try to stop the burst? No, they tried to cause it!

First, they controlled a situation where they lowered interest rates for mortgages to record low levels. This made it possible for people to sell and buy a larger or nicer home, or to even buy second homes. This caused demand to soar, thus causing prices to climb. The government also acted like it was a "right" that every American should be a homeowner. This helped demand to even be stronger, putting more pressure on prices. As the demand continued to grow, construction boomed to add supply, and just about everyone was doing fairly well.

Instead of slowing things down a little, our dear leaders decided to put measures in effect that would bring things to a grinding halt. Lending funds dried up, qualifying became harder, interest rates rose, construction slowed and almost stopped, sales were almost non-existent, jobs were lost, equity vanished into thin air, stocks tumbled, banks failed, foreclosures increased, etc.

The boom has turned into bust... We probably have one out of every eight workers in the country out of a job. Thousands of families have lost their homes. People are struggling to make ends meet.

This brings the logical question: Were we better off in the boom, that government succeeded in busting, or are we better off in the ensuing bust?

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