The economic situation

I guess my first REAL blog post here. My take on the economic situation. Its a highly complex situation with literally dozens of factors and probably beyond what I see. But both parties are guilty of demagoguing the causes and reducing them to one sentence causes. The left blames evil greedy mortgage lenders preying on innocent Americans who only hoped to achieve the American dream of owning a home. And these greedy lenders were allowed to do so because the right stripped away regulation and oversight The right tends to blame greedy home buyers going after loans they cant afford, and the democrats for forcing the banks to lend to people who could otherwise never afford to get a home to increase diversity.

This is my humble take on it. Bear with me, this might get long. For decades Real estate has been seen as the Sure-thing-long term investment. Everyone knew that real-estate in the long term went up in value and for the most part it went up a predictable level. Given how fast real-estate began to grow in the 90s It was inevitable that at some point we would reach a point where the market could no longer sustain ever increasing prices and would move back down.

Here we have the influx of multiple factors all converging at around the same time frame causing the current crisis.
First off, real-estate prices were hitting the upper level the economy could support in the classic signs of a "bubble"
Second Political pressure, combined with greed led to lots of "bad loans" being made witht he expectation that in most of them the people holding them would be able to "flip" the property and get out of a bad loan before it caught up to them.
Third Rising energy prices. With Unrest in the middle-East, the unexpected prolonging of the Iraqi Conflict, and then Hurricane Katrina, Energy prices rose sharply and far faster than many anticipated.

With the rising Cost of energy filtering through to all aspects of the economy and increasing prices for everything, the money people invested with was spent elsewhere on the essentials.
As home buying slowed, prices began to stagnate or fall. People began to be unable to make payments as their ARMs and other loans that are not good ideas unless you sell quickly came due and suddenly the market began to be flooded with homes that were being foreclosed. This pushed prices down further. Energy prices continued to climb and instead of buying people began holding on to their money. Suddenly we find that millions of loans are in default, and major institutions, that were percieved as, if not in fact, holding up the stock market and economy began collapsing. A rush was on to sell as fast as possible to minimize losses and prices plumetted.
At this point we realize that our entire economy was being held together by an artifically inflated real estate market, which has just collapsed threatening to take the rest of us with it.

So the government steps in and promises 700 billion dollars to guarentee the solvency and stimulate lending and trading. So far it doesn't seem to be taking hold. Is it because we dont actually have the money sitting around? The only way to get it is to borrow it from other countries, or print it up and massively increase the number of dollars floating around which decreases their value.
The threatening meltdown has spooked world markets and is leading to uncertainty in the future's markets. Oil is dropping in price even faster than it rose. If this continues the reducing price of oil will lead to lower overall prices and may help with getting our economy back on track as people feel they can afford to do more than just survive.

We are blessed that I work for a company that is privately held and in good finacial shape, also we are somewhat sheltered from the economic chaos as we provide a service to businesses in an industry, that will takes a hit in poor economic times is not likely to collapse unless things are very bad.

I think if most people will hold on and not panic things will get better.