WHY WHEN CORPORATIONS BORROW MONEY DO UNEMPLOYMENT RATES REMAIN LOW
Stock bubble: “Many risked more money than they had by buying stocks on margin or with other forms of borrowed cash”. The buying frenzy created upward price pressure. When the bubble burst, the result was financial suffering and loss on the scale bigger than than anything since the great depression, NASDAQ fell from 5,000 points to 1,000 and trillions of dollars of wealth lost. The fed responded by lowering rates, manufacturers offer zero percent financing, a house buying boom emerged, consumers were spoon fed credit. “Empire of Debt” - 2004 Report card time: New Borrowing by the Fed=$400 billion+, New Borrowing by Private Households=$1 trillion+, Consumer Credit per Capita=$8k, Credit Card debt per Household=$7k, Commercial and Industrial loans= $700 billion, Individual loans= $1K, U.S Corporate debt=$2.5 trillion+, State and Local debt=$1.6 trillion+, Total financed Auto loan=$25 trillion, Federal student loan=$1.4 trilion. Corporations borrow money and the unemployment rate remained low, Americans kept the faith: kept their jobs, increased productivity, enjoyed real estate appreciation, and accumulated massive debt. Banks played the confidence game perfectly and subprime loans allowed 70 percent home ownership.[Learn More ...]
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