Comments on: Did a rising savings rate kick-start the recession? A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: shandy Thu, 11 Nov 2010 15:12:17 +0000 I’m sorry but your ALL wrong !

The straw that broke the “camels back” was a complex interaction between excessive debt and spiralling commodities prices specifically oil.

The media would love you to believe that the withdrawl from the lending and mortgage markets is what caused the failure but I’m afraid that’s populist thinking that has been perpetuated by the press, tv media and failed governements that don’t want to accept their part in the failure and was actually the final blowout / consequence of lax corporate and governmental policy decisions.

From 2004 onwards there were many GLOBAL voices that warned about spiralling house prices running out of control and creating a bubble that would only end in tears. It was in no ones interest to stop the party. the banks were making huge profits a) from the lending and b) from the CDO’s that they sold on. Joe public loved to see their net worth rising faster each month and of course for the speculators / investors (buy to lets) it was easy money and lets face it the best money is easy money isn’t it?

Unfortunately (and I single out the UK Labour Govt and specifically Gordon Brown or is that Clown?) Instead of contacting the regulatory authorities and letting them know that they should enforce 3x salary on all mortgage applications he decided that he would join the party and stuff Governments noses in the trough of greed by raising stamp duty on house purchases at “real terms” lower price levels. (Oh the shame of it Gordon)

Well as more and more participants joined the party and people got loaded up with ever more debt the music started slowing down in the form of a) increased taxes on fuel (uk specific again) and the general increases in fuel prices caused by deliberate (OPEC supply controls) and natural supply restrictions. (limited new oil finds and refining capacity).

Joe blogs who had obtained a mortgage on a house that he/ she could never afford started to notice that the cost of EVERYTHING started rising, fuel for their car and heating, food prices, clothing etc and that their average or below average wages couldn’t cover all the extra costs that they now faced. Ooops !
They never considered that the price of EVERYTHING would rise and they also never considered that if it cost them more to live it cost their employer more to provide services and if it cost the employer more he would be forced to lay off staff or raise prices that risked losing business and laying off staff.

Oh what a web we weave …….

So what was joe public to do? Pay the mortage or put food on the table. They chose food, they reigned in spending and teh banks started to foreclose and guess what? BANG the CDO’s were worthless because the one thing that the rockets scientists in the city never considered was who the hell was going to cover these liabilities. It became a game of pass the parcel

Greed was the bubble. Oil was the pin and when the two met the world went BANG!

By: zotdoc Tue, 09 Nov 2010 16:04:16 +0000 Perhaps the prolonged presidential campaign caused the recession. After almost 2 years of the politicos and press talking about things getting worse or being worse than we thought – so elect me, people started to believe the economy was going down and pulled back. They began to put off spending because everyone was talking on the news about the economy not being as good as we all thought. Less stuff got sold, people started to notice left stuff getting sold, verifying the politicos campaign statements, and the downward spiral into a recession was begun.

By: y2kurtus Mon, 08 Nov 2010 21:04:58 +0000 “Did a rising savings rate kick-start the recession?”


A razor sharp drop in bank lending and a near total freeze in non-bank lending precipitated the start of the great recession.

Best to think of the drop in bank lending as the spark that set of the explosion. The spark would have been less hamful without the dangerous buildup of debt and leverage over a 10 year period.

A drop in bank lending was the fuse that set off the debt bomb.

Best hopes for less gearing in the future.

By: MitchW Mon, 08 Nov 2010 18:47:11 +0000 Don’t forget that the spike to the savings rate in Q2 2008 is a direct result of the tax rebate stimulus passed as a result of that not-yet-started recession.