The Solution to our Economic Troubles.

It has become apparant that we are on the verge of a change in our economy. The housing crisis was a result of a fallacy in economic logic, the idea that housing markets would ALWAYS increase in worth. If this were true, than any fool would go and buy a house, because it is such easy money. As these investments were viewed as so secure, they gained heavy investment not only by home purchases, but by securities, and other investments made by investors who trusted investment banks who believed that sub-prime mortgages were perfectly logical because the housing market could NEVER decrease in value. Well unfourtunatley the housing market deflated, just as the tech markte did before it. Wealth can not be accumulated by purchasing a home with someone else’s money and hoping to sell it for more later, at least not with substantial risk taken by both the lender and the borrower.

So here we are, in a very crapy situation. What do we do about our economic downturn? Is a 700 billion dollar investment going to save the economy?

The answer in my mind is NO. What raises house value in the first place? It is not some natural law or anything. The reason why the house market increases in value, is because the local economy increases. When a certain area (lets say manhattan) does particularly well in producing goods, or service or whatever, ultimately creating jobs, the housing market in that particular area will increase in value. It is important to note that the housing market does not just naturally increase in value unless there is economic growth.

Then the question should be what does create economic growth? It is clear that a government’s role in this country is to make certain investments that will increase economic growth. These investments would not be made by the private sector either because they take to long to profit from, or they are astronomical in size A great example of this type of investment is the highway system. Wal mart could have never invested in making the highway system, it is an astronomical investment, however they as well as everyone who works or shops at wall mart benifits from this infrastructure. (the same goes for UPS, Fed EX and any one else who benifits) The best investment the governement can make is EDUCATION and TECHNOLOGY. In order to get ourselves out of this economic downturn, and avoid a long term depression,. and even losing our status as  a world economic power, we must heavily invest in education and technology.

The best technology investmetn at this time is green technology. This includes clean coal, wind, solar, nuclear etc. We should be at the forefront of these technologies, unfourtunately however we are substantially behind.

Therefor the solution to our Economic troubles are investing what money we do have into education and technology. We need to do research, and the resulting technologies will create millions of jobs, and increase our GDP more than anything else we could do as a country.

One Response

  1. The housing prices sky rocketed because of 3 things:
    1. interest rates went to near zero.
    2. low interest rates ment an increase in buyers.
    3. the supply and demand rule..

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