The Industrial Revolution / The Housing Bust of 2008

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The Industrial Revolution

The industrial revolution was a period from the 18th century to the 19th century where major changes in agriculture, manufacturing, mining, transport, and technology had a profound effect on the socioeconomic and cultural conditions.

Now, what people have been taught in schools is that the industrial revolution was a time of great poverty and that everyone lived horrible lives, because the economy got worse. The evidence they gave you is that reform and protest movements were made. Is this true? Have you ever asked yourself what was life before the industrial revolution?

The industrial revolution gave new opportunities to people who didn’t have any. Before the industrial revolution there were only two options. Option number one; make a profitable living in agriculture. Option number two; have the tools necessary to enter an independent trade. Some people could do neither of these because there was no room left to do it, so when the industrial revolution appeared there was room in the economy for people who couldn’t do any of the two options. As we can see now, the industrial revolution didn’t make people’s lives worse but actually made them better, and the reason why there were protest movements is because the people started seeing a solution to what they were living.

The question now is not if the economy got better, that has been decided, but when did the people begin to be better off.

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The Housing Bust of 2008

Many critics have claimed that the housing boom and bust was a result of the market economy. This is not true, for it was the government policy that provoked this.

Two institutions, Fannie Mae and Freddie Mac were referred to as the government-sponsored enterprises, in other words they had special government privileges. The purpose of these institutions was to help make houses more affordable. How did they do that? They basically made it easier for banks to make more home loans or mortgage loans more affordable. But how?

Here is the explanation, let’s pretend I have a bank named “The Jada Association”, and I give out a mortgage loan to you, well what Fannie Mae or Freddie Mac will do is come and buy that mortgage loan from me. So, I sell the loan to one of them and with the money they gave me to buy me off that loan, I will use it to loan someone else a mortgage. This will continue on and on, making more mortgage loaning and more house buying. Now, if Fannie or Freddie got into trouble by you not paying them the loan, then the government would bail them out of that problem by making the taxpayer pay the bill for you. That’s why they were government-sponsored enterprises.

By now, Fannie and Freddie were the most frequent buyers of mortgage loans. That encouraged banks to make more loans, because they would know that either Fannie or Freddie would come and buy them off that loan.

Then, not only Fannie and Freddie encouraged more house buying, but the government began making these programs that also encouraged home ownership. There were down-payment subsidies, and low-or no-down-payment loans, there was also pressure on the banks by the government to lower the lending standards. In the meantime, the Federal Reserve was pushing the interest rates very low. This made housing prices go up while everything else was going down. Eleven times in 2001 the Federal Reserve created money, and pushed the interest rates artificially low. (See: Society’s Problems: Part 1). A lot of the money created went to the mortgage loans, because it’s attractive when the government is making mortgage loans artificially easy. This made the people automatically think that housing prices never fall, which meant that the best place where you could make would be in the real estate. This basically meant that all you had to do was buy a house, and then you get rich. It doesn’t matter where, or if you don’t have a job, just buy a house with no down-payment, sit there, and your rich. The truth is that never in a million years that such thing was going to happen. If the Federal Reserve wouldn’t of had pushed the interest rates artificially low, they would have been higher, and they would’ve told a lot of people to stop buying houses.

In conclusion, the Federal Reserve wouldn’t let the people get the message of stop buying houses. So, when the housing crash came in 2008, people suddenly found it harder to make their mortgage payments. Now, it’s going to hurt a lot more people, because for the past seven years more and more people got into the real estate.

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