To help me better understand the current economic situation, I emailed a person I know that I thought would offer some insight-an economics professor. He has a Phd in economics and knows Bernake from college. Here's my e-mail and his reply.
At 03:59 PM 9/21/2008, you wrote:
>HI L....,
>sorry to bother you, but I have a question about the current situation.
>>My argument with friends is that the high cost of energy has driven
>up the cost of living to the point where more folks are defaulting
>on their mortgages and credit cards. So, the question is, how is
>bailing out the banks by buying their bad credit going to help the
>economic situation if folks can't afford to pay the credit back?
>>Won't the circle just repeat itself?
>>If you're too busy to reply, I understand, I just thought I would >ask the expert! :)
>>M....
Hi M....,
Well, energy costs and interest rate resets on mortgages drove a lot of people out, setting off a housing price crash which crashed the banks. Paulson/Bernanke are more keen on saving Wall Street by buying bad debt rather than nationalizing. The people booted out will have to pin thier hopes on the Dems.
Best,
L.....
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