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The Dow Jones Industrial Average closed at 13,191.49 on May 2nd, 2008. Today, March 3rd, 2009, the average closed at 6,661.74. What events and economic expectations are responsible for the decline? Could investor’s emotions contribute to or exacerbate the decline in the financial markets? What do you feel could help stabilize the financial markets? Don’t limit your thoughts to the U.S. only! Feel free to explore global issues.
Tags: live financial advice, stabilize the financial markets, volatile financial markets
The economic crisis in general can be blamed on pure greed. The problem begins when the mortgage lenders became greedy and overextended hundreds of thousands of customers mortgages that seemed good, but in reality, they could not afford them. They were for a short time, making a ton of money by charging high interest rates to sub-prime customers. Times were great when everyone was able to get a huge mortgage loan, and everyone was buying nice houses, and the values of the houses were going up in reaction to the demand which made it easy to resell if the bank had to foreclose; everyone was making a lot of money. When adjustable rate mortgages began to adjust (and they never adjust in the customer’s favor) people were in too deep and could not affor their homes. A surplus in foreclosures results in a hard selling market and these lenders were not making their money back. This was the beginnings of the overall financial crisis.
The root of evil of the fianancial markets lies within the debt crisis. The US Central Bank thinks that they could “unfreeze” the banking system by making a few agressive rate cuts. They were wrong as many people expected. They are way too laid back and unconcious of the severities of debt. The disaster is all internal and is a “combination of neglagence, hubris, and wrong economic theory.” There are many structural imbalances within our economy that need to be fixed. It’s a good thing that I will not be responsible to fix all of these issues and I hope that there are actually some qualified personel in school right now with some decent ideas, otherwise we might be screwed.
I would say one of the biggest causes of the current decline is the increasing problem of fraud. Several people, that many investors believed the could trust, took advantage of them, so now these investors don’t know who the can trust anymore. I think investor’s emotions play a big part in the decline, because they are the heart and soul of the world’s financial markets, and they are what keeps things moving. I think the only way to stabilize the market right now is to improve investor confidence by presenting to them companies and leaders that they can trust.
I have to agree with Charles on this one. The housing market is simply a mess. Being that I am 27 I am seeing the adjustable rate mortage crisis right in front of my eyes. Not that my mortage is (Thank GOD), but I have many friends that bought their houses in 2004/5, were sitting pretty could pay all their bills have extra income to go out on the weekends. Now 4 or 5 years later that rate has changed and now they are working two jobs just to get by, some months wondering where will I get the money to pay for my mortage. I see this happening and I think how could of these mortage lenders not see this coming. Sure the income worked when the rate of 5.6%, but now it is so much higher people don’t magically get thosands of dollars for a raise every year. Mortage lenders needed to see the whole picture instead of just the current one.
The other problem I saw was the rate of gas last year. With gas going to as high as $4/5 in some places people couldn’t afford to do things, buy things go places, even if a family got a “cost of living” increase in their salary that in no way made up for the fact that people were paying so much for gas. In turn stocks started to drop futher and further down. Hopefully not that gas has settled, people will start having small amounts of additional income to go out and do things.
well the financial markets are pretty bad right now. The gas prices went up alot a couple of months ago and then they decrease alot? what happened there? i mean its wonderful but whats gonna happen now? Another thing is the mortgage…I feel bad for people who bought houses from 2004 and on. The rate isnt good and it got higher! There are alot of people responsible for the decline in the financial markets. There were a couple of signs that warned us but i guess it wasnt that clear to us. hopefully things will get better and people will realize whats going on.
I believe this is the beginning of the end for the United States as we know it. Just like Europe, there will be a day when we will become part of a one world economy with one universal currency. I am a religious man, and everything you see happening today has been prophesied in the book of Revelation. It goes on to say that there will emerge one central government, possibly governed by the United Nations, and the Bible believes this will be the anti-Christ, in which the Rapture will not be long too follow.
The reason for the collapse of our economy, and also the economy of the world in my opinion is a few reasons. The first reason is the Madoff ponzy scheme that affected thousands of investors around the world. People were not willing to invest in the stock market after that act was exposed. Another reason is the housing bubble collapse. The government was forcing banks to lend money to people that could not afford to pay them back but the economy was buzzing, and everyone thought everything was great, Like every recession that we’ve had, if you just leave it alone the market will level out, and everything will be fine, but this recession the government aka Obama threw billions of dollars at the problem, which will probably make the problem worse because there will be inflation, that will sky rocket. If the banks didn’t lend the money to people that couldn’t pay it back, and the government didn’t force the banks to do it then we wouldn’t be in the problem. If we just leave it alone it will fix itself, it might take time but we’ll be fine, and we won’t have to put debt on future generation in which we are doing now. I know Obama is going to through more money into the problem which will make the problem worse; I have no confidence in Obama as a leader, and hopefully in 2010 we vote these whack jobs out of office.
Many of things are happening in the financial markets, due to the overdrafts in the banks. These banks are the problem they lend out money like its candy. Yeah people need to pay their mortgage and etc… But in the long run it’s hurting the banks. However, they can put a stop to it but the government is forcing them to lend out excessive amount of money knowing that most of these people can’t even pay back loan. It’s horrible.
I believe that the economic crisis is caused by greed. Once people have money all they want to do is make more and more , which is great, however it ultimately hurts our economy because greed makes people do things that aren’t necessarily legal. First off selling a home to a person that does not make enough money to buy it is an issue right there. How is someone that works as say a sales associate at a retail store making minimum wage going to afford a mortgage for a 500,000 house they can’t! By a person forclosing on a house this makes the banks loose money. I think the major issue that causes the economy to crash is that no one is happy with what they have everyone wants more and more. I think what can help stabilize the financial markets is people understanding how the economy works and ultimately being happy with what they have if you can afford a 500,000 house then buy it, if you cant then dont!
i agree with Bianca that people nowadays are greedy and want to make money after they made alot of money. Think of all the busniesses that are around us that are going out of business. Whats gonna happen when the economy turns itself around and goes back the way it was before all this crisis has started. Where do some of these people get the money to make a mall section that is a high end expensive place for people to shop thats greed right there. When other malls can use that money to be fixed up and become a nicer place to shop instead of building onto a place with all that money.
The clear reason as to why we have had such a crisis is like many of my fellow classmates stated, greed. Over the years, mortgage lenders were happy to lend money to people who couldn’t afford their mortgages. But they did it anyway because there was nothing to lose. These lenders were able to charge higher interest rates and make more money on sub-prime loans. If the borrowers default, they simply seized the house and put it back on the market. They very easily passed all the risk onto mortgage insurers so there really wasn’t anythign to lose.
Well in about a year the average is down about 50% which is pathetic, in barely a year. Like everyone else said the reason is obvious. Greed of the banks, housing markets, car markets, and the individual. They all blindly gave money and a year or so later they see what a mistake they made yet it gets worse and worse. But thats okay! we’re here to bail them out of course! Investor emotions are of course the top priority in investing. If they feel something is a good or bad idea, inclines them to invest or not. Looking at all these companies greed and failings, what the hell can we safely invest in? It used to be easy, and now this. Now we have to be scared, careful, and have less money to invest. If we run outside the U.S. for help then what good are we as a nation, we’re obviously not united if all we do is penny pinch our brothers and sisters. Its all just ridiculous. I could go on for hours.
In the financial markets private investors are not investing in the markets because of the unstable funds that are going missing. Since the markets such as real-estate markets and car dealerships, big companies such as AIG are all hurting in this market the financial market is not going to recieve money to keep it turning in the right direction generating money. The thought of everyone losing their retirement money and stocks makes the market a high risk market and high risk markets are not the markets that everyone wants to invest in.
The stock market is in a current sense of turmoil. there is no sense of where the market is going to be going in the short term due to exteme volitily caused by the financial and automotive crisis. both of those previous situations have resulted in massive bailouts to keep the economy a float.
its all caused by GREED thats all that can be said. everyone want to have everything and have to pay nothing. they jut wont give any up for what is needed
This problem has been caused by the banks giving loans that exceed a persons financial limits. People are getting huge loans and cannot afford to pay them back. If they stopped doing this when they first had seen signs of this maybe we wouldnt be in this mess. Also as it was stated above the Madoff Scheme had alot to do with people not investing their money.
The events and economic expectations that are contributing to this decline are many. First off, with the economy in such decline investors emotions are clearly affecting everything. Investors are afraid to put their money out into the market due to the state of the economy. Especially with everything that seems to be occurring with the banks and their misuse of money, I’m not sure how long it will be before the market stabilizes. **** One more point on a certain someone’s “prophetic” theory= I WOULDN’T EXACTLY “BANK” ON THE VALIDITY OF THE BIBLE! ( By the way, I have a crucifix tattooed on my back in case you needed to do away with the whole ” This guy’s an atheist”)