The right question we should ask is not how did we get into this mess?
The right question to ask is how do we get out of this mess?
Just think that you are family in USA, you bought a few condo or houses (over geared), bought a new car, and spend more than you earn based on credit, then your boss tell you, you dont need to work anymore. Multiply it with 14 million unemployed people? what do you get, a group of people that lose their job, their confidence, their savings, their family, their dream?
How did printing more money help them?
More house credit? No way
Lower interest rate? No way
These people do not need more credit, afterall, the bank won't give them anyway.
What is the logical reaction to these situations?
- tighten belt
- default loan and declare bankrupt
- sell houses, or let bank foreclose
- tell other family members to support
- move to smaller house or stay with parents
- buy less luxury goods
- increase savings (if any left)
Times these with 14 million people in America you will realise longer run, these will cause
A NEGATIVE social mood will develop.
What can a negative social mood cause, you may ask?
DEPRESSION? Yep, exactly. Assets price related to bubbles will deflate more than 50%, e.g. housing, commercial lots, constructions, furnishings, transports etc
MyView
Those who think we are out of the wood, look at the cartoon above. It will be tougher over the next 2 years until 2012. Why, see above. When your reserve are used up, what will happen? Chaos.
Some may say, you are too pessimistics. Realistic in fact. What most people don't see in the media? The implosion of debt (especially from the derivatives) is far greater than the printing machine can overcome.
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