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The Cause

Bill Clinton said in the 2000s that 40% of the growth in the U.S. economy came from the real estate market, and the other 60% from consumer buying. Oddly enough, because the U.S. consumes and doesn’t save, the economy is allowed to grow, but for how long at this pattern of borrowing money only to pay it back later?

The flip side is that if people save their money, small businesses don’t grow. Yet if people are spending money they don’t have, and the economy takes a downturn, and unemployment rises, then the economy enters a deep recession. People need to save money for emergency situations, such as a job loss, to pay their mortgages for at least six months.

In the early 2000s the United States was seen as a safe place to put your money and real estate was the new economic product of investment bankers who were selling these mortgage-backed securities.

Former President Clinton said that a new energy plan should have been put into play during this time so money could have gone into new enterprises rather than just real estate, creating more jobs and helping the U.S. economy in the long run by decreasing our demand for foreign oil and oil in general. Instead, all the money got tied up in mortgage-backed securities where the risk level was calculated by computer software programs and math geniuses.

These programs didn’t take into consideration human behavior, general market fear and panic. These securities and homeowner’s mortgages were bundled up and sold off and nobody really knew what they were worth. Nobody anticipated such a cataclysmic collapse.

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