The Economy

I've never really understood economics, so it's no surprise that this current economic crisis is a bit confusing to me. As I understand, basically loan companies lent out too much money to people who couldn't afford it, and then those people couldn't pay them back. As a result, people were losing their homes. Apparently, in places like Las Vegas and Reno, Nevada, people are living in "tent cities." According to this article, the National Coalition for the Homeless reported (in April 2008) that "61 percent of local and state homeless coalitions say they've experienced a rise in homelessness since the forclosure crisis began in 1997." While this article comes from a Las Vegas newspaper, it states that this homelessness is beginning to become more prevelent across the nation.

While many people are at risk of losing their homes, or have already lost them for failure to pay their mortgages, businesses have also begun to lay off workers as a result of faltering sales and the resultant loss of income. It seems to be that mostly smaller companies are doing the most numerous amounts of layoffs. According to the Small Business Administration, almost 45 percent of the nations payroll is from businesses with 500 or fewer employees, meaning nearly half of the nation's income is fueled by small businesses. The truely disheartening part of these layoffs is that fact that companies look to layoff the most highly paid employees; why let two people at lower pay rates go when a boss can fire one? The major problem with this is that many of the highly paid employees have been with the same company for decades. It is thus that these layoffs can become personal, as after 30 years, employees and bosses most likely have some sort of bond.

For families with only one source of income, a mortgage on their home, and a kid in college, this could be a scary time. At any moment, their source of income could come crashing down by a layoff, leaving the family unable to pay for their home and college. This has led families to panic, looking for a means of back up income if the worst should happen. Yesterday, my aunt was experiencing just this sort of panic. After she retired from her position of town supervisor in a small town in Dutchess County last year, she and her family were left with one source of income, my uncle. He has worked for the same company for over 30 years. However, a few days ago, the idea of being layed off became more realistic as the company put out a letter to all employees notifying them of imminent cut backs. With a hefty mortgage on their home, and college loans up the wazoo, the idea of unemployment is a scary thing. Going to work everyday not knowing if you will have to clear out your workspace at the end of the day is a scary thing.

Consequently, with such fear many families are cutting back on spending on things they don't desperately need. Which causes decreased sales, decreased company profits, and then layoffs. It seems almost like a big cycle.

While this is only a glimpse into what is going on with the economy, there is much, much more to learn. So for now, I will tread my way through the trillions of articles summarizing what is happening to the American, and now Global economy. Ugh, this could take a while; but it seems with every article I read and every person I ask about it, it becomes a little easier to grasp.

This article seemed to help if you're interested...and so could this.