What Caused the Financial Crises in America?

It was not Capitalism!
Commentary from the Editor

(Commentary Archive)

The Daily Manumitter
"Then you will know the truth, and the truth will set you free"

What caused the financial crises in America - what was the spark? It was not Capitalism!
If you were working in 2008 - you will remember that gas prices rose drastically- to where gas cost almost $5.00 per gallon. Well- the impact on that for the average working family is severe. I can tell you that when gas was at it's highest - it cost me to drive to work and back close to $12.00 per day - add another $6.00 in tolls and that is $18.00 per day or $360.00 a month just to get to work. That does not include gas for the rest of the month. Add it up and it is about $500.00 per month just for gas.

If you read part one of this series - here - you will know that the average American family (with gas prices at $2.00 per gallon) have average monthly expenses totaling $3,200. These monthly expense included $350 for property taxes, $150 for car insurance, $150 for health insurance, $150 in state taxes, $200 for gas, $250 for food, $250 for electricity and water, $400 for a car payment, $50 for a cell phone and $1,200 for mortgage/ rent, $50 for clothes, $50 for miscellaneous expenses ...This is just to break even... without a vacation or entertainment costs... and these are conservative estimates.

After paying for all of this- the American family was just getting by or living on credit.

When gas prices went to $5.00 per gallon - it placed minimum additional costs of $250 dollars per month onto the monthly budget.

Gas prices were so high that it took up such a great part of the family budget - the American family - stopped shopping for luxury items, electronic products, home improvements, going to restaurants, going to beauty salons, traveling...

As a result- businesses started laying off people and closing. Businesses were not generating enough sales to cover their monthly rent and expenses. This led to even more people not shopping and more businesses laying people off and closing. It is called a multiplier effect.

As a result - people began to default on their mortgage payments. This caused the demand for homes to decline and the price of homes to fall and then people could not sell their homes to payoff their mortgages. Add that to the many who were given loans that could not pay them back and it was financial disaster! However- the spark that ignited all of this was rising gas prices.

Please note that the rise in gas prices was the result of an increase in worldwide demand. Third world countries were becoming more modern and growing. In the United States to combat the increased demand - we could have drilled for oil on American soil. However- liberals opposed it. This is not capitalism! The housing crises which also contributed to the financial crises - loans were given out to people who could not afford them. Example- people were given stated income loans - all you had to do was state your income (no verification needed) and you got a loan. Liberals wanted everyone to own a home. This is not capitalism!

Please note that Muhammad Yunus won the Nobel Peace Prize in 2006 - he developed the concept of microcredit. This is the extension of loans to the unemployed, to poor entrepreneurs and to others living in poverty to allow them among other things housing. This is not capitalism!

Please be advised that when the economy turns around and people start going back to work and start driving again... the demand for gas will increase and so will gas prices. When gas prices were $4.50 per gallon consumers were spending $300 to $400 a month on gas just to get to work- so they stopped buying luxury items, stopped eating out, stopped going out....

If America does not do something about providing for their own oil supply- we will start this whole process over again....

Written by Thomas George

2009 http://www.the-manumitter.com/