The Recession 2007-2009

There are a few rotten eggs any farmer should have thrown away, instead, a genius invents a method to package the rotten eggs in nice wrappings, re-sell them with an unreasonable price to people who would not open the package until the rotten eggs smell really bad.

Here is a very brief summary of why so many people got their asses burnt.

When demands of housings by people-who-can-pay (prime) reached the limit, the purchasing power was extended to people-who-can-barely-pay (subprime). In order to finance the purchasing power for the subprime, the extended 'purcasing power' is nicely packaged as bonds (by any means possible to disguise the underlying risks) and sold to oversea or to any big companies including those are too big to know their own undermining operations (e.g. Lehman Brother). Now the rest of the equation is easy; when the subprime market was exhausted and it was time for them to pay up their monthly instalment, KaBoom! unleashed the "Financial Weapon of Mass Destruction" coined by infamous Warren Buffett. ONLY then the companies began to realize they were losing money as those subprime could hardly pay up. Oh yes, believe it, supposingly companies that filled with genius and geeks from Top-tier Universities should have predicted this. We cannot blame them though, because only the usual fews on the top whose decisions matter most (those received bonuses in millions $$).

"... I appreciate your attendance to this very important conference. You see, we want everybody in America to own their own home. That's what we want....", driven by Bush's speech in 2002, low interest rates as well as the hallucination of ever-increasing house price, more and more subprimes were encouraged to take the risk to buy houses without knowing they could hardly afford. As mentioned above, all those risks were mainly transferred to blinded oversea investors as bonds. Thus, the financial world just 'fall off the cliff' as the train lost its steam. First, banks relied heavily on housing failed, followed by companies invested in those banks. Last, the laid-off pathetic pools of which some are still confused how they got in the mess in the first place.

It is hard to finger-pointing of whom to blame, but it is easier to tell who are the losers and who are the winners of which I will discuss in my next blog.