What happened to US where all these economic problems started?

There are thousands of articles which are discussing the same topic. Here what I am trying to emphasize is just the high level picture of the whole scenario.



For a moment just forget everything and just think about America. What do you recall? Excellent foods, car racing, shopping molls, huge vehicles, clubbing, full of fun activities, families going on journeys etc.


If you look at it closely it is really a collection of costs. How do they spend such an amount of money on these things?


As you know US has a very strong economy and it has gained that stability over number of decades. Lots of manufacturing happened and as a result it has become the giant of the world economy. As a results of the stability of the financial institutions US has very low interest rates. For an example, a person would lease a house rather than spending money on it because the interest rate is very much low.


Furthermore, if you have your own house then the best option would be mortgage the property and invest the money in somewhere else. This is because the interest rate is very low and it is quite manageable if you have a reasonable job.


What people do is, they take the maximum advantage out of the law interest rates and spend money on non profit activities. It would never be a problem if you mortgage your house and put the money on the share market. What happens is, people spend money on other activities like those given above. Most of these are non profit activities and totally a waste in terms of economic perspective.

It was like a bubbling balloon and when it exposes then it is really hard to get it back. This is exactly what happened. Interest rates were low just because of the economy is stable. Ideally what should happen was people should enjoy the low interest rates and should invest the excess money either in a self business or in the shares market. What they have done was just spending money on wastes.



This is really impacted the American financial companies which re giants in the global. Once the giant collapsed no need to discuss about the rest. We all are experiencing that problem.


This is just the overview of what happened and please note that this is not the only reason for the problem. The investment approach of the people also has led to make this problem worst. We can discuss that later.