We've had a bubble economy for a while now. I think there was already a recession brewing due to the housing bubble and the oil/gas prices made it that much worse.
It was going to burst anyway, no one could afford to buy a house when prices were rising 5-10% per year in the southwest when wages were flat.
For sure there was a bubble building, but the worst of it all didn't hit till after companies started dumping dead wood- and soon after companies started dumping anything- even good employees.
They saw a massive drop off in business- all at once.
But yes- there was a house of cards building for a long time in the housing market- I remember several people I knew who were buying $500,000 houses with a $35,000 income. It was insane. People were pulling money out of their houses- buying brand new cars and even investing the money in the stock market.
Nothing made any mathmatical sense- people were in debt so deep it would take 60-70-80 years to pay it all off.
The gig was just about up anyway - then the oil spike hit- and very soon after people started losing jobs left and right. But look at the spike as it occured on that graph I posted- you'll see it was building all through 2007.
In the first months of 2008- the economy stalled out- and by the end of the year, a total economic collapse.
Remember 50 year mortgage notes on homes? Or even worse, interest only home loans.
It really was crazy and goverment should have been trying to nip it in the bud, but both parties loved it and kept giving bonuses to Fannie Mae execs and making it even easier to borrow.
Thomas Sowell: There are no solutions, just trade-offs.
