No. It's the Federal Reserve's fault.
We are suffering from a glut of bad credit from time period before this bust (from now on referred to as the boom). The bulk of the boom started in 2001 when Alan Greenspan lowered interest rates to 1%. This caused a ton of loans to be taken out and investments made in many things. This is due not only to 1% being a low rate of return but also that it signals something. Interest rates are supposed to be directly related to savings rates. When savings are high, interest rates are accordingly low (self-evident if you look at the viewpoint of the bankers). So these low interest rates signaled to investors that people were saving a ton of money and preparing for the future that they were investing in.
Not true. Savings has declined and declined in this country to the point that it is now near 0. So then debts started being called in. After all, you can't loan money forever and then not pay it back. Debtors started realizing something: their investments weren't paying off (think of homes and how people stopped buying at some point). Credit crashed and that's why we are where we are now. Many businesses went under because they couldn't pay back their loans. Bank notes were realized to be worthless and this is causing deflation. People would rather find new work than take a pay cut so people are being fired (this is only temporary as people will eventually work for lower wages since prices are also falling).
So what do we do to fix this?
Well since we have no savings, we really don't have money to lend. Government needs to stop trying to get us to lend and to spend because we need to save if we are ever going to pay back our debts and move on to prepare for the future. Second, we need to get rid of minimum wage. This will effect the poor as their wages are dropping to a point below minimum wage. Lastly, we need to either abolish the federal reserve or they need to raise their interest rates. We need to stop expanding credit because nobody has any money for the future so basically any loans that go out now are guaranteed to be a loss. Raising interest rates encourages us to save and move on.
And that is the only way that we can get out of this. We need to swallow our medicine and stop thinking that government can help us avoid this. We created the bubble and it has popped. These are the repercussions of the boom years.
