What is Happening to the US economy to cause Shares to Drop?

There are lots of issues concerning the downturn of the economy. The Subprime crisis, is basically about banks who issued loans on houses at subprime rates. Meaning they were loans given to people who had a good chance of not being able to pay them back, and often with variable interest rates (which are skyhigh prompting this problem) and crazy fee's, and wordings. Things like pre-payment penalties and the like! Other factors include the falling U.S. dollar. Canadian currency is now wroth more than the dollar. This means we pay more money for items that come from over see's, because the dollar isn't as strong as it use to be. Rising gas prices. Another huge problem that impacts everyone, including business. Higher gas prices means it cost more to produce and move merchandise around the country. This has a snowball effect of making the prices of everything go up. Relating this to stocks, it means people are buying less, and companies are selling less. Their profits are going, hence the stock price is going down. I'm sure this is just scratching the surface, but it's a very complex issue, with no one single cause.

the same thing that has been happening to it for the last 13 quarters. If you believe the US government we have yet to hit 2 consecutive quarters of negative growth. Of course they have fudged the numbers where possible from actually having to say that. Why because more 2 consecutive quarters of negative growth in macroeconomic terms is a recessions and damned if this administration was going to admit that. However if you look at the numbers they published and then retracted or corrected a year later or the numbers from outside sources we have been in recession since late 2006. There is a technical name for that too, "Economic Depression". Why is it all coming to light now? Part of it is they can't hide it any longer. Part of it is neither party wants to hide it any longer. Things will get worse before they get better, and if either party can blame the other until the next congressional cycle there is a good chance the house could change hands again.

I really dont understand it but what I know is that all my ULIPS are about 75% of what they were when I started!

Basically, the US sub-prime crisis arises from the fundamental change from the Traditional Model of mortgage lending to the Sub-prime Model. The BBC News explains the US sub-prime crisis graphically in the following website : http://news.bbc.co.uk/2/hi/business/7073131.stm As a result of the US sub-prime mortgage meltdown, the banking industry, shareholders and bondholders are suffering huge losses. This will cause rippling effects throughout the world economies. The losses suffered by US financial institutions are estimated to be between US$220b and US$450b.

History will always be repeated again, so is the crisis that now faced by America. Capitalism is the main instrument of the US econony, and it is capitalism too that send US econony to crashed! Capitalism and the crisis is like a two-sided coin, they cant be separated. It's like the shadow that always follows us. Subprime-crisis is just one of many forms of capitalism systems. Now it is time for America to reevaluate its economic system. This could be started by realizing that capitalism is not the sole system to fuel the growth. Come on guys! why dont you try another system, such as cooperative system that based on mutual-cooperation and mutual-benefits........

since hit enter instead of preview let me add the part about the sub prime crisis. Sub prime mortgages were a way to loan people people of higher risk to get a home loan they wouldn't ordinarily have qualified for. Under normal circumstances this isn't alway too risky but a lot of sellers got greedy and basically helped people lie on their credit application or lied for them and when the economy turned south these borrowers found themselves in real trouble with mortgages they couldn't afford. Then on top of that there was what happened to my wife and I we were in a sub prime and had turned our credit around in the first two year but when we went to refinance it before our rates went through the roof, the housing market turned around and prices in many areas dropped by huge percentages. Despite improvements we made to the house, the $90k price of 2003 only valued at $65k in 2005. Then we were forced to pay higher interest rates with our original loan company they went from 8 to 11% then to 12.5%. We were still doing okay until my wife got hurt at work and we lost everything... A lot of people found themselves in the position of not being able to afford the higher and higher interest rates or those that could lost their jobs. it wasn't all just people trying to beat the system. In fact I don't think most of it was, at least not in my part of the country.

I don't know what is happening to the US economy... but it is currently affecting my county's economy... the sudden decline of the US dollar, increase in oil prices, and this global warming issue... is taking it's toll in the world... i just hope that who ever wins the presidential race have a concrete plan on how to fix this problem...

I don't know about you, but here in the states we have the Federal Reserve Bank, which IS NOT owned by our governments, nor is a branch of any government. This entity is owned by private international banking concerns. The purpose is to help "stabilize" the monetary system; however, some economists believe, looking at the history of central banks, they do the complete opposite while robbing the country's citizens through inflation and taxes. By continuing to print money with no gold/silver reserves, by diluting the credit through several layers of banks (fractal banking practices) actually lowers the value of the bill (which in our case is the dollar). So when the word starts spreading that the value of the dollar is dropping, investors start transferring their wealth out of dollars and into gold or silver or oil leaving the banks holding the bag or in this case piles of worthless paper.

Just as others said, its sub-prime. But basically, a lot of bad loans were made and a lot of people took those loans to live "the American Dream" ($500,000 house thats in the suburbs and 25 miles away from any city or real people). And these people leapt into it when they couldn't feasibly afford it. Decades ago, lending like this wouldn't have happened. So much has changed however (some of the lenders changed by choice and "competition", others feared potential legal action brought on by people and groups). Also note that housing production was booming in the outskirts of cities for several years now too. The housing market was completely flooded, and soon after no one was left for consuming this product; prices fell in time due to the shelf life rule (housing builders really felt that sting as did some investors). The situation's newest casualty was Bear Stearns which survived both World Wars and the Great Depression, but still found its demise in this situation (a troubling picture already). The dollar itself is also falling in value due to poor economic decisions in the public and private sectors. Spending is out of control on the side of government, while lending and spending was crazy for the past several years on the private side (back to the loans, but also other items). Consumption has been incredibly sporadic and rather telling of the situation (money flowing to medical care, education, or public funding of those items; increased consumption of fuel and energy; lack of consumption in other areas; shifts in state economies) Its value is being lost compared to other world currencies. Markets are losing belief in it due to the realization the item isn't(or won't be) worth much. Due to the rising prices of crops and energy combined with a falling dollar and the telling signs of negative GDP/economy growth... the whole economy is in a downward trend (and also a domino effect since prices are rising while the currency is falling... bad). Its a large picture, quite intricate; its interesting to find out more about it and to see how the situation will play out.

The sub-prime crisis is the result of some really bad banking decisions they were making about 3 years ago. I remember the radio commercials very well. "You can buy a house even if your credit stinks! We have a plan for you, make your dreams come true today!" Baloni! If your credit is not good, chances are you aren't ready for a house. I know good people can have credit problems because of bad circumstances, but they still should have to wait a while to stabilize before buying a house. It's such a huge investment that if you are coming off bad times financially, you're just not going to have the financial cushion you need if things go downhill again, you'll be in over your head in debt with nothing there to get you through till things improve. And anyone who takes an adjustable rate mortgage is out of their mind! You don't know what kind of rate hike they might pull in a few months.