Think about it: in the late 90s, we experienced a dot com com boom, and everyone put their money into stocks. Then the dreams of easy money came crumbling down. The market crashed in March of 2000, and a recession followed within the next year. True, it was a mild recession, but with the events of 9/11 and Enron, people began to bail out on investing. Where did they put their money? Housing. Enter the housing boom, which grew into a frenzy for overseas investors looking to get rich on what they were told was a guaranteed risk. Enter subprime loans being bundled into Mortgage Backed Securities (MBSs). Worldwide demand for MBSs grew to a frenzy and lending institutions started lending to people who were a high risk. I suppose in their minds they thought, so what if they're a risk? if they're a risk, they'll pay a higher rate, and we'll get a better return on our investments. Only trouble: people who are risky are risky because they are not stable and not responsible; otherwise, they would not be a risk.
So, last summer everything began to unravel and the whole mortgage meltdown began, which is still extending its slimy fingers into every corner and facet of the economy. But wait! What about the investors? Where shall they put their money? Well, hedging their bets that the dollar would continue to fall and that political instability would give them cause to say that oil would cost more in the future, the stock speculators have been putting their bets into oil for a good long while....I suspect that prices are climbing not because of scarcity, but because, much like at the end of the housing bubble when people were trying to sell like crazy before the market slowed down, traders are pushing the prices higher because once Bush leaves office, it won't be as easy for people to make easy money off of oil. So while we all pay for this investment and the bet that they will make a fortune off their investment, I wonder: what's the next big thing? Of course, I do not know if what I'm thinking is true, but it's just a theory. I think I'm right though.
My prediction for the next big thing: alternative energy technology. I think much of the money that has been made from oil speculation will be reinvested into alternative fuels, which will do what? Increase the cost of food everywhere, as has already started to happen...but theoretically, if oil goes down, then that should offset the prices so we may not actually see an increase in food prices, but the prices will likely stay where they have been : painfully higher than in the past.
Which then leads me to the great debate over our national economy. Will it be as bad as the Great Depression or will it be like the sucky time of the 70s, where stagflation was king? I happen to think we are headed back to the 70s in terms of stagflation, but the 70s did bring us some innovations, like smaller cars like the Honda Civic. Not everything was bad about the 70s...it just wasn't great. And although I barely remember that time, I do remember that times were definitely leaner back then. I remember Christmas presents being much more scaled back than when I got older. I remember my parents using powdered milk for me to drink because it wouldn't go bad, and it was cheaper. I remember everything being much simpler back then. True, I was only 3 by 1980, but my memory serves me well to remind me about a little of what it was like back then (I actually remember wearing diapers--they itched!). What I do know is that people suffer through worse. And if our world comes out of it a little cleaner and less destructive to the environment, then maybe the medicine will be better for us in the long run....maybe.
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