I'll try to make this as simple as possible. My take on it all.
It has absolutely nothing to do with republicans or democrats, in my opinion they are both the same thing.
First off I want to mention GDP for those who don't know what it is. GDP is a nations gross domestic product,
which means how many goods and services the nation produces with in year. What does that mean? It means how many companies produce goods and sell them or services.
Well currently the US has a negative GDP, despite what you might hear on the news, it's negative. What does that mean? It means we produce less than we consume. But how can that be?
The US imports more goods than it sells. We buy everything from other countries and don't produce anything locally. So all our money goes to other countries. But why?
Companies in the US find it harder and harder to make money because they are forced by the government to hold high standards. They are forced to pay high taxes, they are forced to purchase licenses or insurances to operate. They are forced to provide benefit packages to their employees. When it's all said and done, companies in the US can't afford to spend any on research and development because they are so strained financially. On top of this companies that sell stock options to off set all this high overhead MUST turn higher profits to sell more stock. When these companies fail to turn profits, their stock holders abandon purchasing more stock thus straining the company for future development.
I can use General Motors as an example. GM produces cars yet they don't sell very many because the quality of the cars they produce are lower than their foreign counter parts. People gravitate towards quality and GM can't afford to produce a quality product because they are so forced by government regulations to give high incentives to it's employees and all the safety regulations it must obey.
Foreign car manufactures are not forced to pay their employees high benefits nor are they required to have licenses or insurance to operate. They can therefore pool more money into their research and development and spend more on quality construction and still be able to sell the cars for low price and make a profit.
So for the same money you could by a GM car or a Honda or Toyota and and which car do people mostly buy? The higher of the quality and I bet you can figure out just from the above paragraphs which one that is.
This leads me to the second part of the US economic problem.
The housing bubble was caused by the FED which set interest rates on borrowing too low. I'll try to explain.
People blame other people for being greedy and borrowing too much money. But in reality it's not the peoples fault, it is government.
If interest rates are set low, you don't make any money off secure investments. What does that mean? If the bank only gives you 1% interest on your cash in the bank that isn't very much after you compensate for inflation rates.
However; since interest rates are so low, instead of saving money you are encouraged to borrow instead. So people take out loan after loan and buy crap they really don't need. But their behavior is set by the FED. If the fed and increased interest rates to like say 10 or 20% then people would more likely put money into their bank accounts. People won't borrow as much money either if interest rates are high.
So since the FED set interest rates SO low it sparked peoples behavior to borrow money and buy houses. Since so many people were buying and buying and buying it pushed housing prices up and up and up. This was the cause for the housing bubble.
A bubble can't expand for ever, at some point it must burst and that's what we experienced. But the government is blaming people for the problem when it was the FED all along that caused it.
But what are we doing to fix the problem? The SAME thing we did to get us into this mess in the first place. The FED is trying to keep interest rates low, people are not saving money, instead they are wanting to borrow and spend. This is going to artificially inflate prices and cause another bubble.
What needs to be done is saving and investing. But for that to happen the FED MUST set interest rates higher, so people have the incentive to invest.
The problem with the banks was not due to the housing bubble but instead due to the banks lending practices. Since the FED had set interest rates so low, lots and lots of people were borrowing but the banks didn't actually have the money to back these loans. I'll try to explain.
Banks are only required to back 10% of loans. What does that mean? Well if you open a bank account and put in $100 the bank can turn around and loan out $90 of your $100 in your account. So let's say someone shows up at the bank and borrows the $90. Well in reality if you went to the bank to withdraw your $100 then the bank needs come up with $90 to give you but it can't because it just loaned it out to someone else.
This is called being insolvent. The way the government tried to fix this problem was by just printing the money and giving it to the banks. Although if they actually told people that is what they were doing everyone would have got mad. So instead they came up with a fancy terminology called "injecting liquidity" into the market. This was an attempt to make the banks solvent but it causes massive inflation to do this. The solution was not to allow banks to lend out more money then they have or allow interest rates to freely rise and fall without the government (FED) setting the rates.
So where does this lead us? Well to our new debt of course.
The US has a national debt. It must pay the interest on the debt but since the US doesn't have a positive GDP it does not make enough money to pay it's debt. So the US has been borrowing more money from foreign countries like China to pay it's interest on debt.
Well this is starting to fail. The Chinese are starting to not show up to purchase US bonds but the US still needs to pay the interest on the debt. If no one purchases the bonds the US is forced to print money to pay it's debt.
So the US has been printing money to pay for it's debt. Obama has stepped this up and they have decided to monetize the debt. What this means is by printing large sums of money you can effectively pay off your debt by devaluing the dollar. I'll try to explain.
If you borrow $100 from a friend and you want to pay him back, you need to aquire the $100 from doing either work (produce and sell) or by borrowing another $100 from someone else. Since the US doesn't produce much anymore it can't work for the cash so it needs to borrow from someone else. But there is no one else to borrow from so it decides to print the money. So the FED prints $1000 which allows it to pay back the friend easily and not only that but it now has a surplus of $900.
That might sound all great and problem solved but the part that hurts is the printed money in the economy causes the value of the dollar to drop. What does that mean? It effectively causes you to have to have more money to purchase the same amount of goods or services. So this causes prices to rise but it's not because there is a shortage of products but instead it's the value of the dollar lowering.
This is called monitizing the debt. You basically cause the value of the dollar to fall so far that the amount you owe is basically nothing.
EVERY COUNTY that has montized their debts have all collapsed their currencty. What does that mean? It means the value of their bills goes to zero. You can't buy anything, no one can work because you can't get paid. You can't do anything because there is no money to do anything with.
If you think I am paranoid, do a google search for zimbabwe. Everything they did, the US is doing. Our fate will become their fate if we do not stop the FED from printing money or injecting liquidity into the market.
If you have any questions or want further explanation on any of this I have mentioned above, feel free to ask. If you want to debate the issue, that's fine with me too.