Thursday, October 2, 2008

The American Economy going towards depression

The major stock market crash, the donation by the government, then eventually a 1 trillion dollar loss; the American economy might be going towards another depression. If you have read my previous articles about the great depression, then you should be able to understand what is happening in the American Economy represents a similar pattern which occurred in 1930s.

1.) High Inflation Rate
2.) Stock Index reaching record highs and record lows in a small period of time
3.) Closure of huge businesses

The inflation rate for gas prices has been abnormally high. Not significantly high for one consumer, but all together the inflation rate is almost 30-40%. Stock markets have recently been funded, recovered and then went downhill. One of the major causes is the bank loans, which were granted to people who couldn't afford to pay back.

Banks usually take all your assets if you are unable to pay them the loan back. But the assets of Americans were no where near the loaned amount. This money was lost in businesses, stocks, gambling, stock betting, food, etc. Since most people failed, they had a huge debt and filed for bankruptcy. While this was happening, the banks were also not able to get money and this resulted in some of the major banks to increase interest rates or close down completely.

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