Many people claim this: "Well, it is normal what is happening to us, we just were too reckless when it came to spending, we bought many unnecessary stuff" That is simply a myth, and I´ll give you the average Spanish guy as an example: He had a very small company, he was electrician and earned 1000 per month. Over the time he began to notice orders grow, so, he hires 8 assistants, just to cover those new orders, otherwise, he couldn´t have get all those new contracts, that is why he hired the new employees. All seems nice, he sees in the new that unemployment rate in Spain is 8%, our record, ever, so, he feels glad, and the little company is doing great, so, he earns now 3000 on a monthly basis (this is taken from an actual case). Part of his income goes to a bank account, to save money, just in case things turn out difficult, as we all do, to save money every month. Then, he decided to buy an Audi, but lookout, HE BOUGHT IT BECAUSE THE MONTHLY PAYMENT WAS ONLY 10% of his income. (Nobody seems to realize this!). He once told me: "If the car had meant 30% of my salary, I wouldn´t have bought it, needless to say" So, he asked for a credit for a new machine for his company to be more competitive (as a good business man always does: to reinvest part of the income in new machinery). Why could he do that?: Because he got overwhelmed with so many new contracts and therefore he hired 8 workers to cover those new projects, he bought a new machine for exactly the same reason, and he bought a brand new car because that meant only 10% of his income, ...truly, I don´t see a reckless behaviour anywhere. Where I see the recklessness: Leverage , sounds familiar? . Goldman Sachs, Lehman, and so forth lending 40 dollars and only having 1 dollar , that is leverage I think. What is more, some claim that raising leverage was too dangerous, but they didn´t care , they were making a killing!!. So, they had cheap money and they lent to everyone, to non-reliable people too, just to everyone, and this was a very reckless behaviour on the banking side, and now, they try to blame us because it was us who spent money unnecessarily , but my friend (the electrician in the above example) didn´t spend much, only to re-invest, and a good car, is true, but because he earned 3000 (that is a good salary indeed in Spain!) , and the payment was only 400 . TO make a comparison I earned 1800 and spent 200 on my car (monthly payment) and nobody took me as a careless person for doing so, but, since he had an Audi, all of a sudden , he was a very reckless person. I don´t believe that, it is just a myth to blame us, what I don´t get is why people believe everything they hear.
Just because the guy in your single example isn't reckless doesn't mean it isn't a wider issue. The simple fact is that there are lots of people who have been saving less (or nothing!) and borrowing more for recreational and luxury spending rather than the essentials. We're not talking about people borrowing 10% of their income but 50%, 100%, 200%, people who can barely cover the interest payments, let alone pay off any of the principal, people whose entire monthly pay (or benefits!) goes in to paying off credit cards just so the debt can build up again, people living from payday-loan to payday loan. Even for those who balance this spending and don't build up ever-expanding debts, it means that when circumstances suddenly change for the worse (either individually or on a wider scale, as has happened) they have no leeway to cushion the effect and are immediately in crisis.
Low savings rates can create problems. The most obvious example is a trading imbalance. However, that can't be used as a direct cause of economic crisis (e.g. a trading imbalance would only create problems indirectly through a rapid and destabilising devaluation effect). The current crisis can only be understood through structural deficiencies (arguably created through the hegemony of the financial class).
Corporate greed.... Foreign outsourcing is to blame and it's not just effecting America, countries all over the world are being effected
Corporations aren't greedy. They engage in profit making. The management of the corporations is charged with maximizing profits. Their very jobs depend on it. Perhaps it is the investors who are greedy?
Corporations are able to maximise 'economic rents'. To compare it with standard profit maximisation isn't cunning. One has to refer to asymmetric information and the numerous moral hazards created, problems which shift us away from standard exchange theory to something more akin to conflict (and something worse than a zero sum game)
