Economics - Is This Stage Freak or Natural?

[B_ScaredLittleBoy]

So yesterday there was a heated debate in the office about the economy; moreso the UK than the American or global economy.

Anyway I was wondering: is this current stage (I think most would call it a downturn, verging on a recession) natural or has it been caused by exterior forces such as people having been allowed ridiculous amounts of credit with no real means of paying.

I couldn't get any information from google but I was wondering...since we've had about ten years of a boom/upturn are we not due a downturn anyway? Or is it that the coming downturn is a lot more severe than it would have been if credit had been properly regulated and controlled?

Just curious.

 

[Elmer Gantry]

Too much easy money for the masses and too many funny money deals on the market.

You think sub prime sucks? Wait until the music stops on the derivatives market! That;s currently nearly ten times global GDP worth of thin air and paper.

 

[D_Chaumbrelayne_Copprehead]

It's just like your own personal situation ... only with a ton more details ... but they're just details.

If you get overextended and can't pay your bills, you're in trouble. If you plan on, say, selling your car or house to pay your bills but they're not worth as much as you owe, you're in deep shit. This is basically what happened to these companies who invested so much in these mortgage-backed securities and other derivatives. Stuff that they thought had a certain value ... well, it turned out they either couldn't figure out how to value it, and then the market decided it wasn't worth much at all.

 

[TurkeyWithaSunburn]

Will credit default swaps cause the next financial crisis? - Sep. 30, 2008

$54.6 Trillion in credit default swaps
$54.3 Trillion for global Gross Domestic Product

Uhm I think something is going to break. It's going to be more severe because everyone got greedy. Couldn't just have a good profit, it had to be bigger than the next. It's like a shell game at Enron except this time it's legal.

Let someone else take the risk, and you take all the profit. What happened to risk based profit? The bigger the risk the bigger the profit, and it supposed to create something of real wealth. Otherwise it's just gambling.

We have regulations to help stop insanity. Unfortunately the night nurse forgot to give the patients their sleeping pills. And now maniacs are everywhere.