The world as we know it, is in deep recession. People have lost their jobs, their cars, their houses, their dignity and in some cases, their multi million dollar bonuses. Big CEOs of major car companies have flown in their private jets to Washington to go begging to the government. Banks have gone under. Stocks have hit rock bottom, drilled through it and are now approaching earths core. Governments are throwing money at people to try and jump-start the economy that is flat lining like a patient under Dr Kevorkian. For once everyone is telling us to go berserk and spend money on hookers, LCDs, cigarettes, booze and ecstasy. So what started this disaster? Was it Complex financial instruments? Junk bonds? Cheap loans or ninjas? Who caused this? How did it happen? We all contributed to the filthy disgusting mess we find ourselves in. So let's analyze how we screwed ourselves in the ass. I'm not talking about gays here, so getting screwed in the ass would be pretty damn painful and disgusting (How to save money in the crisis) .1. We see the share market rising everyday so we think it would be nice to put our hands down those pants, so we go and buy shares.
2. Because people are buying shares the share prices keep increasing. Companies become emboldened and take on riskier ventures and offer shares as collateral. They offer bigger returns and project huge future earnings.
3. This increases share prices and greedy people buy ever more shares expecting them to keep on increasing like a rabbit population on viagra.
4. Sky rocketing share prices embolden companies. CEOs greedily accept bonuses that could feed a small third world country for a week. Companies take on ever more riskier stuff like junk bonds and complex financial instruments. These are so complex that even Einstein would need a stiff shot of whiskey before he tackled them. And even then the outcome would be dubious.
5. Interest rates start to bite people who have taken out loans, some default and those houses go back into the market. Investors take their money out of housing and chase the more lucrative share market. Supply exceeds demand and house prices drop. People with loans find out that the mortgage they are paying exceeds the value of there house. As these are no-recourse loans people just abandon the houses, leaving 'kiss my ass' signs on the lawn.
6. Lenders are now left with abandoned houses,that are worth less than the money they lent. with more houses entering the market, these lenders find that they cannot pay the bigger lenders who lent to them. This goes on up the chain of lenders.
7. Companies start forecasting losses now instead of profits, shareholders start selling their shares. The share prices drop. Companies that have taken out loans and are in mild difficulty find out that they can't use their collateral to settle their loans, because the collateral is usually shares and the shares are worth less than a thong bikini in Antarctica.
8. Big companies find out that the small companies they lent to are defaulting, so now they have a liquidity problem. They don't have cash to service their loans, they go under. All the high risk junk bonds and CFIs are returning nothing but debt.
9. Comapies jut jobs to lower their costs in order to survive. More jobs cuts are forcasted.
10. People don't want to spend money because they think they may need it if they are fired. No one is going to put their balls on the line for a new LCD now are they?
11. No demand for products and services means the people producing those items have to cut back. This leads to more job cuts.
12 Vicious circle continues - eroding consumer confidence.
13. CEOs take home handsome pay packets and bonuses for flushing their companies down the toilet. Share holders are outraged because their savings and nest eggs have gone up in smoke faster than Urkel cumming inside Halle Berry.
14. Governments step in to try and stop the disaster, but it's like bailing out the Titanic with a teacup. However, the rich people get the lifeboats (government bailouts), and the poor people get lot's of icy cold water.
