Darker Monday

As a home owner, my biggest fear would be to lose my flat. My second biggest fear would be to see its value drop. Middle class Americans unfortunately experienced both these dreadful situations this year. The economic crisis which was caused by the energy crisis, budget deficits, natural disasters among other things, caused a lot of companies to downsize. Not everyone found a job. Not paying the mortgage - with current legislation - for more than a few months gives the bank the right to forclose the house. Even if the owed value is a tiny fraction of the original loan. So many Americans this year not only lost their jobs, savings, in some cases spouses because of the upset, but also their homes. The one thing that they have been working their life to built was taken for them. Losing a home sends an unberable strike to the ex-owner.
In the midst of that crisis, banks and other financial institutions that gave loans saw an opportunity to make a quick buck. They foreclose the houses of the unlucky ones and flooded the market with low cost but high quality housing through auctions etc.
What this created was a bigger drop in house prices, stock price collapse of institutions that had loans/insurance tighed to mortgages and Wall Street's strongest quake since the Great Depression leading to $700bn losses in one day!

Unfortunately it is not over yet


Now, I can not help but think of the following points:
1. The banks and other financial institutions lay their bed so they should sleep in it. Had they not flooded the market with low cost housing this would not have happened.
2. Usually those who pay the dearest price are the ones with the least resources. Once again proven right. Unfortunately!
3. This clearly shows the need for a new type of legislation to be imposed on banks so that they can not forclose a house if someone shows inability to pay for a period of time that can be prolonged given circumstances. Banks can afford to wait. People should not have to live on the street.
4. Loans should not be that easy to give away. Having a social security ID should not be just enough!
5. I never really liked money markets. In my opinion they are largely a hot air bubble that is easy to manipulate.
6. Although I am a fan of a deregulated market, in a Smithonian laisser faire-laisser passer approach, there should be some frame that maintains a minimum level of contigency plan for people in need. Otherwise the social divide between the rich and the poor will increase and totally unregulated capitalist societies such as the US will end up being completely bi-polar. Some measures have been taken after the disaster but there should be some preventive mechanisms.



And of course I can not help but wonder:
When McCain and Palin say that the economy improved over the last 8 years and that they shall continue to work on the same successful recipe, which country's economy were they referring to?