Richest Nation USA Going Through Economic Slow Down?

well i live in the USA, and truth be told, its falling apart. the reason why is because our government has let our economy run rampant for so many years, that our mortgage companies have grown to unbelieveable heights. take freddie mac and fannie may, these two companies both own 50% of our countries reveniue via. mortgage and homeloan rates. this is around 4 trillion dollars i belive. the other secondary companies have been falling apart too. people have not been able to pay their mortgage, so the banks that have loaned them their money cannot receive it. and since most banks oftenly send their mortgage loans to secondary companies such as freddie and fannie, this causes a massive feedback... its a sstem destined to fail, and it has. it wil continue to decline untill america reaches another depression or the government completley revamps the way teh economy works. the war in Iraq only expedites the process of our economy's crash.

Well I am not American, I am Australian and we are affected by this as well. Personally I believe that it is the result of greed and lack of regulation. America is great at pushing free market ideas but the problem is that without regulation you get people taking risks with other people's money and causing problems. The problems occurred because people trying to make money by selling mortgages sold them to people who were very high risk and in danger of not being able to pay it back. What they called the sub prime market. That is people the banks would never touch. Not only that but they gave them mortgages with no deposits so they were able to buy a house borrowing the whole amount. That is fine if you can meet the payments. The trouble was that the borrowers could not meet the payments and defaulted. This caused the housing market to go down so the houses were now worth less than the amount borrowed and the people who made the loans started to go broke. Then it snowballed right through the finance industry as each company went down the people they had borrowed from sustained heavy losses and they went down and so on right up the chain to some of the biggest and oldest investment banks. The government is now trying to save the situation by pouring money into some of the mortgage banks but no one knows if that will work as they are not sure if anyone else will go broke. Other banks have stopped lending now so the banks in trouble cannot borrow to finance their debt. All very nasty. I do not think it has anything to do with the price of oil but that might be a factor some where. The problem as I see it is that salesmen are told that they must make sales and increase the company's profits. This is the whole problem with capitalism. It works on the principle that profits are infinite but in reality they are not. Markets are finite and you cannot have infinite growth in a finite market in the end the growth stops and everything crashes on the debt that finances it all. Then you have a depression and eventually the survivors of the depression all start again. I think that the US is heading for a depression but they might be able to stop it if they changed the way they thought about the economy and stopped trying to make infinite profits. I know there are economists who have talked about this for years. Capitalism was fine when they were constantly finding new markets but there are no new markets and the only way the companies can increase profits now is to start sacking staff to cut costs but that will just hurt the economy as people get sacked and the cannot find a new job and so cannot pay their bills etc.

Even though I am an American and I've been watching this thing build up here, even I am hard pressed to explain it properly, Ganesh. To put things as simply as possible, it was a build up of several bad problems...which individually weren't very big at first, and had they been taken care of swiftly after they had began..instead of going unnoticed like they were, this country would never have gotten to those point. The wars did prompt a vast spending of our resources, money, and there's reason to believe it helped hike up oil costs. But there was also corruption, greed, bad policies in the housing market, in credit, in banks, in our companies...and we began to move away from alot of U.S. made products and many U.S. businesses are dependent on things from outside of the country...which combined with the dollar's decline due to government debt, borrowing, and all that inflation...it became quite a hole we've dug for ourselves. Mind you, the average american is innocent in this crisis of ours. There were of course some stupid individuals who were average, but the the bad people laid down the foundation for them to contribute to the problem. I've probably forgotten alot but this is the bare bones of it. Truth is, America may not be very rich any longer. Our government's current plan to save us from ourselves may tip us into an economic collapse which'll leave us with generations of debt.

Hi Ganesh44, You are absultey right my friends, that is what is going on in the U.S, they bit off more then thy can chew. Tamara