The United States of America is supposed to be the land of the free, and home of the brave. Over the course of the last 30 years those few brave rich and wealthy Americans have taken that freedom away from the people. Capitalism, deregulation, greed, and fraud are the four reasons the Americans have created the biggest global recession since the great depression (Bloomberg.com, 2009). Americans have lost their jobs to foreign workers in other parts of the world, and those able to secure a job are forced to work longer for the same pay (American Dream, 2011). The American economy hasn’t always been bad, but after President Ronald Reagon (KittySneezes.com, 2009) the United States economy has continually started to decline. The US Government ran into criticism of running the country as a corporation thus being profit driven instead of acting on the greater good of the American people (Corporation of the USA, 2010). The major banks in the US all contributed to the financial collapse of the economy at the expense of the people, while they received $700 Billion (Bailout Deal CNN, 2008) in funding giving them the ability to rebuild and become bigger and stronger than ever before. People work hard to own their own home but in strive for short term profits, lenders and banks gave away mortgages like candy which allowed borrowers the opportunity to refinance, even after knowing all the repercussions (Countrywide Tactics, 2007). As if these profits were not enough, lenders sold these toxic mortgages (Bloomberg.com “Toxic Waste” 2007) off to investment banks which turned into a ticking time bomb until someone was left holding the bag. How could such an economically sound and stable country turn into such a nasty society effecting all those domestically and abroad, let’s take a look back at the good old days.
Since the great depression both the United States and the rest of the world have gone through a rollercoaster of ups and downs in the economy. Approximately 50 years later in 1981, Ronald Reagon who was originally a Hollywood actor and Governor of California took the countries attention and won the election and became President (KittySneezes.com, 2009). He came into power at a time when the economy had nothing but room to grow. Reagon quickly became known for his “Reagonomics” or his fiscal policy that helped transform the United States (KittySneezes.com, 2009). He believed that his policies would lower taxes and stimulate the economy. Unfortunately his execution of these policies led to the discontinuing of many government programs such as welfare, food stamps and other programs in select regions (KittySneezes.com, 2009). He then decided to increase military spending leaving a substantial financial burden and public debt for future years to come. Some also labelled Reagon’s economic theories as supply-side economics (Reagon Economic Policy, 2000’s) mentality, due to his tax cuts to try to stimulate new jobs and higher wages. The belief of less Government involvement led Reagon’s Government deciding America would be better off deregulating the financial industry (KittySneezes.com, 2009). As we now know this only benefits the banks and corporations at the expense of the people, virtually cutting out the middle class twenty years later. Some called Reagon the perfect spokesmen for Wall Street as he overnight created the banks the freedom they needed to make billions.
The Americans are known for free enterprise, capitalism, and for creating the label “American Greed” (Corporate Greed 2007) for themselves. The United States has ultimately divided itself into a classic plutonomy model. Their economic growth is powered and consumed by the wealthiest 1% of society. This also refers to the fact that the majority of the wealth is controlled by an ever-shrinking minority; as such, the economic growth of that society becomes dependent on the fortunes of that same wealthy minority (Investopedia, Plutonomy 2008). In 2005 a controversial Citigroup report was leaked reporting to its wealthiest investors the state of the now global opportunities in a plutonomy driven countries. They explained how in the United States the consumers, who will always hold a majority of the population, find themselves with a disproportionate piece of the wealth (Citigroup Report, 2005). They also state how the income, consumption, debt, and savings of the majority of Americans leads to higher spending power and consumption rates that allow the rich to keep filling their pockets. Consumption in the US takes up roughly 70% of the entire economy (US Consumer Spending 2011) which leaves a great importance for the country to maintain consumer confidence and increase GDP growth. As of 2009 the United States reached a gross domestic product index level of just over $14 trillion dollars (Google.com GDP Chart 2009). The problem is that Government predicts that the US deficit will top $1.5 trillion dollars this year, roughly $0.40 cent for every dollar spent (US Budget Deficit 2011). If this keeps up, the United States will never pay back their debt to China and other countries. This problem also affects the jobs in America; if citizens cannot get a job the government is losing tax revenue.
American families use to be able to live off one income. Today both parents work and in some cases still isn’t enough leading some parents having to get a 2nd job. Instability of jobs for the working class in America has lead to a major increase in the frequency of layoffs over the past few decades. These job losses have contributed to workers incomes to bounce around a lot more than ever before. So not only have middle-class families been getting meager raises, their finances have also become more volatile (Squeezing the Middle Class? 2007). The unemployment rate in America reached a plateau of 9.5% of the entire work force as of February of this year (Google.com Unemployment Rate Chart, 2011). Based on a 2009 US census the gap between the rich and the poor has increased to approximately 50% of the income generated in the country. This income fell directly into the pocket of the top 20% of Americans (Income Gap Widens, 2010). Those Americans below the poverty line increased to an all time high of almost 14% of the total population (Income Gap Widens, 2010). What’s also shocking is the number of US citizens on food stamps, nearly 12 million Americans had to result to these extremes to just get a meal (Income Gap Widens, 2010). Its data like this that you never want to see but in reality we are likely to see all these numbers increase in the future. Americans need a stable job to be able to pay their bills, but more importantly prevent their home from foreclosure.
The mortgage crisis in the States started a domino effect that had the potential to collapse the entire global economy. Thanks to technological advancements the world has turned into one huge global economy that we all depend on. The crisis began when it became easier for borrowers to become approved for mortgages they never should have received in the first place, example bad credit or debt to income ratios. Lenders got greedy and saw the potential in maximizing their lending volume with borrower’s homes as collateral (Mortgage Crisis Overview, 2009). As the trend started to increase home owners also realized they were sitting on a pile of money if they owned any equity in their home, this led to a massive trend to refinance (Mortgage Crisis Overview, 2009). In the United States as many Americans eventually figured out, that the intuition holding their mortgages were often not the lenders they originally dealt with. Most mortgages were often sold off to investment banks were these banks would combine them with other debt, bonds and garbage investments often referred to as collaterized debt obligations – CDO’s or derivatives (CDO Definition, 2007). One of the investment banks that found themselves in big trouble from these types of investments was Goldman Sachs.
Before the whole crisis the CEO of Goldman Sachs at the time was Henry Paulson. He was in charge of Goldman Sachs at the peak of the economy in 2006 when business was good. Soon after he left Goldman to join President Bush as secretary of treasury (Bush Nominates Paulson, 2009). Immediately he felt at home as he was now amongst many other former Goldman executives. The very mess he helped create while at Goldman, he was now in charge of part of the solution as treasury secretary at the time of the crisis. With almost full control over financial policy in the States, Secretary Paulson created and successfully executed the largest financial bailout in history estimated at about $1 trillion dollars to date. (Government Sachs, 2009) Goldman has also managed to acquire 30 ex-government officials working as registered lobbyists in hopes to maintain their political influence. This power and influence on the government has led the bank to not be responsible for their own actions and mistakes in a country that is built on the foundation of capitalism.
The Americans have made a lot of mistakes when it comes to their economy, but they have not done anything to prevent the greed from returning. Capitalism, deregulation, greed, and fraud are the four reasons the Americans have created the biggest global recession since the great depression (Bloomberg.com 2009). Americans have lost their jobs to foreign workers in other parts of the world, and those able to secure a job are forced to work longer for the same pay (American Dream 2011). The American economy hasn’t always been bad, but after President Ronald Reagon (KittySneezes.com 2009) the United States has continually started to decline. The US Government run into criticism of running the country as a corporation thus being profit driven instead of acting on the greater good of the American people (Corporation of the USA 2010). The major banks in the US all contributed to the financial collapse and at the expense of the people, while they received $700 Billion (Bailout Deal CNN 2008) in funding giving them the ability to rebuild and become bigger and stronger than ever before. People work hard to own their own home but in strive for short term profits lenders and bank gave away mortgages like candy and allowed borrowers to refinance knowing all the repercussions (Countrywide Tactics 2007). As if these profits were not enough, lenders sold these toxic mortgages (Bloomberg.com “Toxic Waste” 2007) off to investment banks which turned into a ticking time bomb until someone was left holding the bag. The people of America need to speak up, and unit together to over through the current Wall Street Government of America.
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