The Great American Bubble Analysis

It is often said (perhaps even to the point of exhaustion) that history is significant because if we are to reflect on historical events we must realize past mistakes and learn from them. The 1930s may have followed the 1920s but it could not have been more different and there are many explanations for this. The disastrous recession of the 1930s was caused by more than just one factor, and the less than sustainable ways of living in the 1920s are a testimony to why the economy crashed. Although some might consider the rise and fall of national prosperity in the 1920s and 30s to be an issue only pertaining to the past, there have been similar problems repeated since. By examining the contrast between these two decades, we as consumers can educate ourselves on the importance of a stable economy, and then make rational decisions about how we can contribute to the economy; like when we should be spending, saving, and investing. The bust of the economy in 1929 was an example of the failures of indulging in a purely capitalist society, which is often overlooked by modern economists analyzing the Great Depression.

In the Book, Pop, Why bubbles are Great for the Economy by Daniel Gross, there is an explanation of why people today do not understand the agitations and turmoil that create barriers to improving the economy. The ideas that economist hope to see in the world, are very farfetched from actuality. This world that they think of is a dream that is practically perfect in the way of allocating resources and making sure everything is done in the best possible way. However, people cannot all see the bigger picture and have faith that it will be what is good for the economy. Instead, our economy is centered over a few main points which are self-indulgence, entrepreneurship, and sometimes this can cause mayhem within the economy. Daniel explains how Americans handle our economy growing and new things coming to the public’s eye as if losing their marbles and everything crumbles from there. The book discusses different time periods that bubbles got out of hand and because of that people were hurt financially. People got hurt because the prices of different markets rose when the economy was not ready for it to raise. The different industries that the book exhibits are telegraphs, railroads, the internet, real estate, and alternative energy.

The word “fraud” was magnified in the business world around the end of 2001 and the beginning of 2002. No one had seen anything like it. Enron, one of the country’s largest energy companies, went bankrupt and took down with it Arthur Andersen, one of the five largest audit and accounting firms in the world. Enron was followed by other accounting scandals such as WorldCom, Tyco, Freddie Mac, and HealthSouth, yet Enron will always be remembered as one of the worst corporate accounting scandals of all time. Enron’s collapse was brought upon by the greed of its corporate hierarchy and how it preyed upon its faithful stockholders and employees who invested so much of their time and money into the company. Enron seemed to portray that the goal of corporate America was to drive up stock prices and get to the peak of the financial mountain by any means necessary. The “Conspiracy of Fools” is a tale of power, crony capitalism, and company greed that lead Enron down the dark road of corporate America.

Chris Cox the ex-security exchange commission chief, with his inability to enforce the rules, especially in the Madoff scandal, as if he did have the power to go after investment banks like Lehman Brothers, which was a product of the repeal of the Glass-Steagall act and Merrill Lynch for better disclosure, he simply chose to turn a blind eye to it. Interesting enough, the American consumer was fifth on this list, and that is because of the constant borrowing and living above the means of their income. So once the bubble burst, we realize that we had less money to backup all bills as stated within the article. The money we owed per individual increased to more than 130% of income in 2007, up from about 60% in 1982. As we continue through this article, we see Hank Paulson’s name, he was the treasury secretary in 2006, and Joe Cassano, the founding member of AIG financial products unit, which used the credit default swap (CDS) for companies to pay their debts was at the center of the downfall of AIG and as stated before costing the American public billions of dollars in bailouts. Ian McCarthy as the CEO of Beazer homes was exposed in the Charlotte Observer in 2007 for aggressive sale tactics, which included lying about borrower qualification in gaining loans

The Wall Street stock market crash is the worst and longest economic collapse known as The Great Depression in the United States during 1929 through 1939. Millions of people lost their savings when financial institutions began to fail. This greatly affected those who were also on unemployment making the statistics reach twenty five percent due to companies laying off their workers because they didn’t have the funds to pay them, and forcing those to buy on credit leading to debts and foreclosures. (Belmonte 652) Additionally, due to so many people losing their jobs it caused them to act desperately when it came to supporting themselves.

The following essay will thoroughly examine the severe economic downturn of 2008, formerly known as the housing bubble collapse. We will mainly focus our discussion on the effects the financial crisis had on Canada and the U.S and examine why both countries were affected differently. Although the collapse of the housing bubble is the most identifiable cause, it is extremely difficult to pinpoint one specific defining moment or event triggering the global financial collapse. There are many factors involved, due to the complex nature of the financial systems across the world, and this paper will delve in the key contributing variables that led to this financial crises.

The article summarizes the authors distaste in the reality that Wall street executives maintain an ever constant authoritarian stance on the “economy” as a model of generating income, claiming an understanding that only those within their ranks possess. The article attributes it as “epistemological”, I would agree, and go as far as to make an analogy to the days when the bible was in a foreign language, and the language of “god” could only be given to them by their leaders of the church, an archaic and authoritarian model of thinking.

When researching past economic recoveries, the housing market is the one to drive the economy out of recession. That being said, this economic recession hasn’t had much of an impact until recently. America’s housing boom had a tremendous influence on the economy for its low prices and flow of new home construction.

Wall Street was the responsible for the 2008 Great Recession. The took advantage of both the people and the system. Not only did the start the Great Recession in the U.S.A, but they also made it global because of the ability to trade worldwide. Wall Street investment banks though they were “too big to fail”. Because of this arrogant attitude they did not realize that they were causing a great problem throughout the world. And most important of all, it was Wall Street’s greed that ultimately brought about the Great Recession. Wall Street used poor decision making and invested in abad stocks. Once the Recession hit

Wall Street was in fact dominated by wealthy businessmen, many of which who made millions by solely “playing the market.” Indeed, people began believing that they would be able to do the same; to press a button and the stock would go up ten points. These stocks were also manipulated by the wealthy when they pooled their money into a secret agreement to buy a stock, inflate its price, and sell it to an unsuspecting public. Again, even though wealthy businessmen did everything in their power to attract the public, it was the individual’s fault for making a poor decision. The second least to blame for the stock market crash is the Federal Reserve Board.

Yes, I do think that it is easier for them to follow through with a plan of economic prosperity compared to countries in Africa. The economic boom took place in America, because of advertising and mass production when the boom took place, some people relocated to the suburbs. The economic boom also involved the Civil Rights Movement and the Cold War.

3. Why did influential individuals like Fisher, Keynes and Rockefeller believe that the downturn would only be temporary?

Buying influence or engaging in conflicts of interest: Goldman engaged in activities were the companies and their customers’ interest conflicted. Still they moved forward in making money off them. Also, although not specifically stated on the case, the fact many formers Goldman executives held government positions proved to be a conflict of interest itself. Some of those people still had strong relations within Goldman and it can be said that one way or the other Goldman took advantage of that.

According to Wikipedia a housing bubble is a type of economic bubble that occurs periodically in local or global real estate markets. It is characterized by rapid increases in valuations of real property such as housing until they reach unsustainable levels and then decline. Four years into the housing bubble downturn, much of the country remains hopelessly confused about what happened, why it happened and who is to blame. In my research paper I will try and demonstrate what a housing bubble is, some of the reasons for the bubble, was it preventable, how it kept growing, how it burst and how it has affected our economy.

It was 1929, and in the United States things could not be better for those smart enough, or for that matter, brave enough, to gamble on the Stock Market. All of the big stocks were paying off handsomely, the little ones too. However, as much as analysis tried to tell the people that this period of great wealth would last, no one could imagine what would come of the United States economy in the next decade. The reasons for this catastrophic event in American 20th century history are numerous, and in his book, The Great Crash, John Kenneth Galbraith covers the period and events which lead up to the downward spiral in the fall of 1929 and the people behind the scenes on Wall Street who helped this fire spread.