Friday, January 30, 2009


I couldn’t really think where to start today, so I figured it would be a good idea to start with a little background information on one of the main events that occurred that lead up to our financial situation that we are in now. This event would be the fall of the housing market. This basically caused the decline in home values across America and caused families to be unable to pay their mortgages. This along with the loss of jobs caused the decline in the economy. That is the hand that we have been dealt, and I am here to explain this to you.

First it all, to set the scene. Its just about the turn of the century as we enter Y2K. Economy was doing pretty well, Clinton obtained a surplus in US funds rather than the traditional budget deficit. In addition to that, millionaires were being made on the stock market with online businesses. Things were going good. People started to upgrade houses, buying bigger and more of them. The adjustable rate mortgage allowed many people attain homes that would normally be considered out of their budget, but because of the low rates they were very appealing to consumers. A simple background idea for the adjustable rate mortgages were that they were really low, however they had a rate lock that was only temporary meaning they could change. Hence, adjustable rate mortgages could change.

During this time, roughly around 2001, we should have been using contractionary fiscal policy, increasing taxes, and lowering the money supply. By not doing this we set ourselves up for decline. This wasn’t really accomplished due to the fact that increasing taxes is not a very easy thing to do politically thus, it never occurred. With the economy booming, people started to buy houses not only for themselves but for investments. Housing values were on the rise, and people saw this as a vehicle to attain wealth. Which in most cases it was, however for the people that could not afford it but did it anyway, devastation occurred.

One of the major responsibilities of banks failed during this time as well. Banks were lending out extra loans so that people could purchase these houses that shouldn’t of. Items that are reviewed during a normal application were sometimes overlooked. Things such as credit score, income, debt-to-income ratio etc. were all overlooked. So people started to buy up all these houses, however when it came time for their adjustable rate mortgage to adjust, their rate wasn’t so low. Adjustable rates shot up, making them more costly to pay for each month. This caused many who could not afford these to default, or go into foreclosure. When that happens, the bank gets the house back, because the person could not afford the payments. As we know, banks deal with money, not houses, they don’t want them. With foreclosures increasing over the years, 2004/5-2007 home values dropped, causing people to become “backwards” in their loan, simply meaning that they owe more than its worth. With the economy in a downward spiral, more and more people could pay their loans. This caused the creditors to tighten up credit, making it hard for people to get loans. This is NOT good especially in a free market, because our economy functions on credit, we need it to buy and increase spending to raise GDP.

That is the housing market situation quickie. This will help you to get a preview of one of the biggest causes for the decline in our economy. Hopefully this helps to aid in your understanding of building the foundation of your knowledge of the economy as of now.

Thursday, January 29, 2009

Welcome to The Crucible
Hello and welcome to The Crucible, your melting pot for what’s hot. As a college student, we must be fully aware of the world around us. Every day, new events occur, and new changes happen. Without accepting this change and these events in our life, it would make us inadaptable to the growing world that surrounds us. Thus, success would not be in reach for us to grasp so firmly and climb upon it. Therefore, I would like to make readers aware of current situations going on around them, and simply relate these occurrences so that we can become better in tune with our surroundings.
Currently our generation is spawning at the midst of a financial crisis. Banks foreclosing, credit tighter than a college kids wallet, and the stock market seeing its lowest decrease since the great depression are all things that play a role in our future success rate after college. Michigan, currently holding the highest unemployment rate in the country at 10.69% is proof that we are in a vulnerable era to decreased success. However, knowledge is key in these situations. Having this key, could enable us to overcome, step up from this ditch of disaster, and separate the sea of financial burden with our staff of knowledge. This knowledge can be obtained through observation and relation. We shall come together as one, by reading The Crucible, and becoming aware of the surrounding situation and relating it to our lives to form the knowledge that we must obtain to venture on down the path of greatness.
I would also like to venture into the political region of our country with news stories that have a top priority in a college student’s life mainly due to their relationship with our success in life. We have a newly elected president, who preaches change and a new era. However, talk is cheap. That is why I will be bringing to you the stories and new from Mr. Obama to show the proof of change or no change. We are at a time in history were not even the best orator can bring us from the depths of financial burden. We must paddle with action taken, not by the words of our mouths. Therefore, news of upcoming change and events will be brought from Washington, and related to you. Thus, it is our generation that needs to gain superior knowledge and step up to strive for the success and longevity of our country.
Thank you for beginning the transition to success, and for gaining the knowledge that will provide wind beneath our wings to fly in the clouds of the great and bring our society back into the realm of forward movement. Hope can be a powerful scope on the rifle to shoot down devastation and triumph over failure. We must learn from mistakes and gain the tools necessary to move forward. College is a way to become specialized in a career field and become a smarter person, however we must not over look the need to aware of our surroundings and situations so that we can maximize our skill of the hunt for success, much like a lion in their territory on the verge of taking down a gazelle.