You know, I spent from 2004 to June of last year in the financial industry and I have to tell you – I felt like I was losing my soul in a godless world …a world where there was only one rule – GREED IS GOOD (GIG)!
The current state of affairs in the world is the result of the GIG principle – millions of people now out of work; people losing their homes to foreclosure; bank closures; business closures leading to more people out of work!
Here is a brief of what happened: (being a simple fool, I’m going to keep it simple)
1. Those in the financial industry all wanted to turn more profits (GIG in action) than they could with the status quo – so the “geniuses” devised a number of “legal” ways to invest in highly risky investments (like SWAPS), putting very little to none of their money at risk (that is, as long as everything in the world remained stable).
2. Lenders start loaning RIDICULOUS amounts of $$$ to people to buy things like homes and gave people all sorts of credit facilities like CREDIT CARDS – to the point that people ended up owning homes they could not possibly afford, on top of having more credit card debt than they could ever hope to pay off! These financial institutions didn’t care because they could basket all those risky loans and sell them to other institutions (see #1 above).
3. #1 & #2 caused a FAKE bubble in housing prices and in the economy as a whole (people spent the money they were GIFTED in the form of home equity loans, credit cards, etc…). This kept a lid on the bubbling and expanding cauldron for awhile (between the tech bubble of 2001 to around 2007.
4. THE PARTY WAS OVER!!!!!! Easy money/easy mortgages lead to over-building, too many homes on the market fueled the DRAGON, making lenders lend even more $$$ in the form of “sub-prime” mortgages, basically the legal term for your local loan shark! Yeah, they’ll lend you all you want – and break your knee-caps (interest/penalties) when you can’t pay! GREEDY people with too much debt started paying their mortgages and credit cards late! We're all a bit guily of that.
5. The industry answered with their normal DRAGON’S BREATH – foreclosures, insane interest and penalties! That usually "fixed our wagons"… but wait… by 2007, it didn’t! People stopped paying their mortgages, credit cards, etc…
6. The lenders started foreclosing and taking homes away from the folks BUT WAIT – now they had TOO MANY HOMES and combined with the over-building – NO ONE WANTED THESE FORECLOSED HOMES! This stuck the lenders with $$$$$$$$$$$$$$$$$$ of useless real assets! These financial institutions were now insolvent in a BIG WAY!!! BUT WAIT…
7. THOSE SWAPS… you know, the so-called “impossible scenario” investments were all being called in! These dumb, idiotic “geniuses” in these super-huge financial institutions (banks, insurance companies, pensions, etc) had basically fired the torpedo that turned and killed them! (Think of the scene from my favorite movie/book THE HUNT FOR RED OCTOBER, “…You fool, you killed US!” The institutions that took positions covering these defaults, DEFAULTED! What does that mean? It means that there was no one to cover the defaults of all those mortgages!!! This basically caused a MASSIVE GLOBAL cascade effect (Since the world invests as the U.S. does).
Okay, so what does all the above result in?
- Millions of people lose their homes!
- The entire real estate industry goes belly-up including lenders like Countrywide (my lender), construction companies and anyone else associated with real estate.
- The home values across the nation drop significantly, due to a glut of too many homes on the market and most everyone being broke!
- Credit dries up! The party is over for all of us “CREDIT ADDICTS!” We all became used to being able to find someone to lend us money (credit cards, home-eq’s, etc) whenever we wanted something – and MAN, most of us went BONKERS CRAZY! We even USED LOANS TO PAY OTHER LOANS! When the train stopped, everyone got caught holding the bag (lol… I know, I used a double-cliché, but it reads funny, doesn’t it?)
- Financial institutions go out of business… or do they? Oh no, some don’t because the U.S. GOVERNMENT decides to buy their debt, pay their bills (and wipe their… well, you know)!
I hate to tell y’all this but… there is no fix for this! The world melted! Now the U.S. prints funny-money to pay for all the sins of the past several years! Guess what happens when there is too much money printed – we call it inflation and man is it coming!!!
There’s even a scarier monster on the horizon, it’s called STAG-FLATION… that’s a situation where on one hand there is inflation and on the other, the economy does not grow to offset the former. What does it mean? It means that stuff will cost A WHOLE LOT MORE but none of us will make more!
I was so disgusted with the industry; I quit it and vow never to go back to it! I’m going to stick to writing my fiction …and stockpiling canned goods!
It’s been said that truth is stranger than fiction, because fiction has to make sense …ain’t that the truth!
That's my "scare-blog," please enjoy the rest of your day! 9-) (Comments, rants and raves are welcomed)
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Dean Wesley Smith