What Caused the Great Recession?

by Victor Cheng

As the great recession winds down, I’ve been reflecting on what caused it in the first place. And here’s what I’ve come up with.

The real cause of The Great Recession is simple.

In nutshell, it’s not illegal to be stupid.

Why a bank would lend someone a million dollars to buy a home that’s broke, unemployed, and has no income, I’ll never know.

It’s stupid, but guess what? It’s not illegal.

For the borrower that was broke, unemployed, with no savings that got the million dollar loan, perhaps it seemed too good to be true (it was)… and upon further reflection on the idea that the borrower does have to REPAY that loan at some point, it probably wasn’t too smart to say “yes” to that loan.

It’s equally dumb to basically make side bets on whether these loans to sub-prime borrowers will be repaid. It’s even more dumb to make such bets by borrowing tons of money… so any loss is magnified by 100 fold.

It’s also pretty dumb in my opinion to let all of this happen without any of it being illegal. I’m all for a free market economy, but even I believe there are some limits.

It may not be illegal to be dumb, but it ought to be illegal to be dumb and reckless.

The reason I mention this is because right now conditions exist in the economy that will form the basis of the NEXT recession – which in my opinion will quickly follow the end of THIS recession.

Yes, I think the likelihood of a dreaded back-to-back recession has steadily been increasing over this past year.

The primary reason for my perspective is the bulk of the recovery has been driven by government spending as opposed to improved customer demand, higher incomes, or more jobs.

The reason I mention this perspective is because many businesses got hurt and many killed because they were caught off guard by the economy.

It wasn’t the economy that hurt them. It was the fact that they weren’t prepared the hurt them.

Well, let me be one of the few voices to say that there will be continued uncertainty in our economy.

This IS the New NORMAL.

It is best to adapt to it. Decide you will prosper regardless. Take actions to make it happen.

I am working on a new program that will show you HOW to grow your business despite what’s happening in the economy.

I’ll share with you the premise right now.

Imagine the economy is an economic pie. Under normal circumstances, you get your slice of that pie.

When the economy shrinks, the size of the economic pie shrinks. The only mathematically possible way to grow your business (i.e., get more pie) in a shrinking economy is to get a bigger slice of the shrinking pie.

You do this by taking business away from competitors who aren’t as nimble or quick to adapt… the ones who are not prepared to prosper in tough market conditions… the ones who are sitting by waiting for the good times to return (bad idea).

In short, you prosper in this economy by meeting customer needs when competitors are too busy hunkering down, retrenching, clinging to bad decisions, and waiting to be rescued to give customers what they want right now.

While this is common sense, I can assure you as a behavior it is most certainly not very common.

This is the premise behind a new program I am working on… a program for the entrepreneur and business owner that has vowed not to participate in any “bad” economy.

(Hint: It’s never a bad economy when your business is growing)

Stay tuned for more details…

Comments

{ 2 comments… read them below or add one }

Labyrinth_92506 September 11, 2010 at 9:32 AM

I can't believe you dare to put commentary on the internet but act so stupid when you know the real answer is because of Democrat policy.

You know very well why banks loaned that money. It was called the Clinton era Community Reinvestment Act. along with the threat of government intervention and investigation under Janet Reno's control.

And your assertion that this is the new norm is Bogus. Rather it is the time to kick the corrupt, the unprincipled and Democrat loser politicians to the curb and go back to the standards we use to enforce. The left wing has demonstrated this equalization mentality of trying to equate some loser that has done nothing with our grandfathers whom worked thier butts off, and that just doesn't fly. The millennium generation is an infection to the human spirit and existence.

just 2 cents December 28, 2010 at 11:10 PM

What a fool? The recession exposed at least one thing the unregulated free market is unsustainable due to “GREED”. It seems you are close to reality but you have Cavoto syndrone. A bank loans money to people who can't repay is beyond stupid,it's suicide.
This is known as Karma.

Leave a Comment

Previous post:

Next post: