The Economy - United States

Background - After the fallout of the Dot.com Bubble, America was able to regain its economic footing through low interest credit and an exploding housing market. As construction created new wealth and opportunities for American families to live in larger and more valuable homes, interest rates and sub-prime mortgages encouraged less-than ideal borrowers to apply for loans that they could not afford to pay back. These as delinquencies rose, investment banks found it harder and harder to sell this bad debt while individuals could not sell their newly acquired homes due to falling home prices from rising foreclosures. This left many people with homes they could not sell or pay for with banks that could not afford to stay in business.

The First Step.

Clearly before a solution can be created, a villain must be identified. As easy as it would be to place the blame on the big, bad investment banks or the government, the real blame should lie on the less-than credit worthy borrowers. Just as we would not victimize someone who buys a gun and then shoots their own foot, we should not be victimizing people who tried to live beyond their means and failed. They made a bad decision and saddling the cost of that bad decision onto responsible Americans would not only be fiscally irresponsible, but also immoral.
However the banks are also not without fault. They have no one but themselves to blame for their current financial situations. They made poor choices and government bailouts would only encourage this type of behavior while placing all of the risk of this bad debt on the American public.

How to deal with it.

Banks should negotiate on their own with their customers about the terms of their loans. Those who cannot because they have already failed are already past the point of salvation. A government bailout will only mean that the intense and devastating losses will be spread out over more time and across more people who had less to do with the meltdown than anyone. Instead of spending nearly $2 trillion (about $6700 per American), Americans would be better off with leaving that money in their own pockets to jump start saving for a new, cheaper house. The banks that fall could easily be bought out by those who don't and those who don't will be given a perfect opportunity to lend to the Americans who need to move out of their ill-gotten homes. These new loans should obviously be taken with greater consideration, however they should provide a springboard into a future of more responsible lending under greater regulation.

The Final Product.

The greatest and gravest question we all must ask here is: where should the money come from to fix this problem? Many in Washington and on the news stations seem to think that we should all share the burden. However this would be irresponsible because it would only pass the cost onto future generations while never truly addressing the problem in its fullest extent. Bipartisanship and regulation are excellent tools that we have at our disposal, but the best tool we can utilize at this point is tough love. Let people understand the gravity of their actions. Letting home prices go down will allow more American families to buy homes for the first time while job losses will depress wages and encourage businesses to hire new workers. Lower wages will be offset by lower home prices and banks will rebound. Its a business cycle, albeit a bad one.