Year's end 2008

As the world turns one more time, 2008 comes to an end. Comments in this morning's newspaper were generally "good riddance". I'm sure those comments had to do with the down turn in the world economy. That is by far the most single issue that has affected more people on this planet in a long time.

I used to hear my parents talk about what it was like during the depression years. We all know that the depression became reality with the stock market crash of 1929. Now, historians will write about the crises in the home finance industry of 2008. Banks and mortgage companies had financed homes with low interest rates to persons who could not afford to make their payments as the interest rates increased. The result: foreclosure.

At the same time, someone seemed to realize that many financed homes were overvalued for their mortgages. Homeowners who wanted to get from under their mortgages could not sell their homes because they owed more than what the new value of their home was worth. Many homeowners just walked away in a loan default.

The source of funds for new loans dried up as money became scarce. Money was just not available at finance institution. Banks all over the country seemed to falter and were gobbled up by other banks. A few even went into bankruptcy. Stock markets all over the world began to decline in value. Investors scrambled to salvage their investments and 401K plans.

The U.S. Congress came to the rescue to Wall Street financial institutions with a $700 billion package to pump money into the economy to make money available for home loans, auto loans and to businesses for their operating capital.

At the same time, the auto industry saw the affect of the economic down turn as car sales plummeted. General Motors and Chrysler talked about a merger. But, it was soon realized that both would run out of cash by the end of the year. Bankruptcy was in site. The big three auto companies went to the U.S. Congress requesting loans to get them through these troubled times. Congress could not see the American people paying to support the auto industry when its workers earned considerably more than its competitors.

Finally, the Bush administration found ways for the auto companies and their unions to compromise and agree to concessions. The Bush administration arranged for $15 billion in loans from the financial industry bailout package for General Motors and Chrysler. Ford said it was OK through 2009. This prevented what could have been a major crises for the 250,000 auto workers and the 400,000 workers of the auto industry suppliers.

By year's end the stock market had lost about 35% of its value. Most investors saw their savings and 401K plans loose a similar amount. So, I agree with the consensus, good riddance 2008.