True, the crash of '29 definitely set everything into a tailspin, but the crash was precipitous in that it was the result of people taking on debt which they could not afford, banking on the stock market AND real estate as well as oil prices rising ever higher, that it eventually had to come crashing down. (BTW: when you hear someone say something will just keep going up, well, Einstein and Newton can tell you that that isn't exactly true, and for something to truly keep going, the momentum would have to be so great that it could escape all of the natural forces of this universe...unfortunately, no economic model shows this phenomenon).
Coupled with the decline in the stock market, real estate also crashed in the late 20s. In Thomas Wolfe's "You Can't Go Home Again," Wolfe writes about himself (albeit in a fictional prose) after he returns home from publishing his first novel (Look Homeward, Angel), and in it he describes the real estate market of the late 1920s based mostly on speculation and dreams. I remember that as I read it, I felt like we were going through similar motions, even though agencies like the FDIC had been created to insure people's money in banks.
In addition to the crashes of the stock and real estate market, among many other things that happened, there was the weather. The Dust Bowl hit in the plains, and hurricanes ravaged the pricey market of Miami, FL, leveling much of people's investments in estate in FL.
Much of what happened in the US also spread out to the rest of the world. True, Europe had already experienced its own depression in the wake of WWI, but the US's troubles exacerbated conditions which led to needy people looking for a leader who could pull them out of poverty and into power and wealth. We all know who that leader was, of course, with his infamous mustache and powerful influence. Had the world not been in the state it was, I doubt Hitler would have ever rose to power.
My point in saying all of this is threefold. A. As much as I disagree with bailing out all of these companies, I think the AIG bailout is necessary, as they are too globally linked. B. As the fed continues to bailout companies, are they just delaying the inevitable? Is there really just only so much that the world financial markets can take before a total collapse happens? C. Obviously many people profited off of the real estate bubble. So where is their money going now? If so many people invested their money and actually did well, then it should stand to reason that there is still money there. So where is it? It has to be somewhere. I wonder. I would like to know...and then create a business to get them to invest in my company.
Of course, I tie it back to my family. I worry about B keeping his job, even though the are hiring more people again. Their plan is based on getting a line of credit. They also plan to buy distressed properties at 70% of their value, and then resell it for the 100% value. Their target markets? Vegas, Phoenix and Detroit. I forbid B to go on walk-throughs for these places...they have basically said that they are willing to look the other way for criminals who want to rent. Words cannot convey how I feel about this. I want B to have a good career, but at what cost? And for that matter, will they even be able to get the line of credit with this plan? Sounds like a risk to me. I wouldn't lend them money....and then there are my aunt and uncle, who have done very well...I just hope they have all of their assets protected, b/c there is a chance the FDIC would not be able to insure much of what they have....and of course I worry about my sister for reasons I do not want to go into in here. Let's just say I hope that reason prevails ahead of hopes and dreams for my brother-in-law. Dreams are great, and they are motivation, but then there are responsibilities, and their names are K, B, C and C.
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