THE CREDIT CRISIS: AN ECONOMIC ROLLERCOASTER RIDE RICK TOBIN
From Boom to Bust…….
What is typically the catalyst for the
transition from an economic “boom”
time period to a “bust” time period?
One of the best answers may be
tied to the figurative “slamming of
the brakes” related to Americans’
access to capital or money. When a
borrower has more flexible access
to capital (i.e., loans, equity money,
margin loans, etc.), then this same
borrower may have more options for
Virtual Money and Debt
investments, business expansion, or
earlier retirement options.
According
to
some
financial
and
economic
sources, upwards of 97% of all forms of money
On the other hand, if money is tight or more
created here in the USA may originate by way of a
challenging to qualify for like in recent years, then
computer keyboard. If true, then only 3% of all
a prospective borrower or investor may not be able
forms of American money may be created as coins
to expand their investment or business options, as
or dollar bills. The combination of the Federal
much as they had hoped to at the time. Since
Reserve and the U.S. Treasury may create our
money does not literally “grow on trees”, then one
oxymoronic “Fiat Money” (or “assets backed by
must find better access to capital in locations other
nothing of real value”) primarily by the power of the
than one’s backyard or under their mattresses.
computer keyboard stroke. Prior to President
Nixon taking the U.S.A. off of the “Gold Standard”
“It takes money to make money” is one of the truer
back in the early 1970s, the value of the U.S.
statements
dollar was allegedly backed by gold more so than
as
it
pertains
to
investment
opportunities. Yet, hard work, persistence, and
“thin air.”
good luck also may figuratively “open doors” to
various new opportunities as well. If more real
Also, American money is backed by oil by way of
estate buyers and sellers have better access to
the “Petrodollar” system since most forms of oil
capital or cheaper and / or more flexible mortgage
worldwide have been traded for U.S. Dollars over
loans, then there may be more opportunities for
the past few decades. Sadly, more countries like
home purchases or sales, partly since most buyers
the “BRICS” nations (Brazil, Russia, India, China,
of real estate need third party loans to complete
and South Africa) are opting to trade their oil for
their purchases.
currencies other than the U.S. dollar.