The article, “Revenge of the Glut,” was written by Paul Krugman. He is as an author, an editor, a columnist for the New York Times, and a professor of Economics and International Affairs at Princeton University. This article was published on the internet on March 1, 2009, by The New York Times and in print on March 2, 2009, on page A23 of the New York edition.
The article was written as a comparison of the past “subprime lending crisis” (subprime borrowers… more likely not to pay the money back, such as those who have a history of not paying loans back, those with a recorded bankruptcy, or those with limited debt experience) to the present day economic downfall. It is directed to all audiences who are confused as to how we got into this situation. Who is responsible and how did this happen?
In my opinion, the writer is stating the reasons our Nation is in this crisis are due to the Asian markets, the U.S. lowering interest rates to increase capital, and citizens living beyond their means. Asia was a huge importer of capital, but after their economic crisis, they started hoarding huge amounts of foreign assets and exporting “cheap money” to any country who would take it. Namely, the U.S. because of the extent of our financial markets (creating an immense trade deficit) and greed. Still, the banking industry is to blame as well. The banking industry has loaned out more money than it has received. By withholding the true facts from the borrowers, especially in the mortgage industry, this empowered the banks even further to create a huge consumer-spending boom that most did not qualify for the financing. Therefore, placing the consumer in a financial crisis, even bankruptcy, for which the taxpayers have to pay back. In addition, greed dominated the consumer. Instead of saving money and paying cash or minimal financing for purchases, consumers financed items that they truly thought were going to increase in equity and put cash in their pockets, regardless of affordability. Credit was so easy to obtain and accessible. Paying it back is completely different story!
This crisis has caused a domino affect throughout the Nation. The world has held a false perception as to the increasing wealth in each and every country. Consumers have started saving more and spending wisely, but it is too late to accept responsibility for our past actions. The bubble has burst and this will affect future generations for many years to come.
