Viable businesses could not get loans, and projects were cancelled for lack of funding. Even people with a good credit rating could not get a mortgage. This put more people out of work, and the problem began to feed on itself. It was exacerbated by an understandable fall in consumer confidence; people who still had money began to be afraid to spend, and this further affected the real economy.
The greed factor
Profiteering was not the only reason for the creation of the current problems, Boersma noted.
One of the reasons the U.S. government pushed sub-prime mortgages, he pointed out, was so that poorer Americans — including members of racial minorities such as blacks and Hispanics — would be able to buy houses.
However, all the experts CC.com consulted asserted that greed was certainly a significant part of the problem.
“The root behind every recession is over-valuation and over-consumption,” said Paul Rowe, associate professor of political and international studies at Trinity Western University in Langley, B.C.
Greed, said Williams, was a common denominator among all those involved: salesmen, who sold the mortgages on commission; banks, which pocketed the fees for arranging the mortgages, and then passed the risk on to others; investors, who bought the mortgages hoping for a quick profit; and people who bought houses they knew they could not afford.
Similarly, greed motivated the stock market rise, Hennings said, adding: “There is an element of greed in every bubble.” This includes everyone from investors who “wanted to get more than they deserved” to “senior [company] managers who wanted to squeeze the last penny out of stocks” in order to get performance bonuses. There was “a casino mentality,” in which everyone involved wanted to get something for nothing.
The current problem is an “inevitable downturn in the business cycle,” Hennings said. Such recessions usually happen about every 10 years, Rowe suggested. The last one occurred in 1991, and the last really serious one in the early 1980s. These recessions are usually relatively short; but this one, Rowe said, “might be worse — since we postponed it.”
“Nobody is sure how much longer” this recession will last, Williams said. The decline in the U.S. housing market is slowing, but has not stopped yet. Once it does, it will be “the beginning of the end of the financial problem.”
However, that will solve only the short-term crisis. More serious, Williams said, is a long-term problem. “The U.S. and the West have been on a debt spree, borrowing and spending above their income for 30 years.”
In the U.S., individuals, companies and governments have accumulated debts amounting to 225 percent of the U.S. Gross Domestic Product. Therefore, “this is not just the business cycle — but a big wake-up call.”
The very low savings rates in North America indicate “an unwillingness to make sacrifices to build in the long term,” Hennings said, adding that it is an open question whether we can “regain the virtues of economy and prudence.”
Some American preachers have declared that current economic problems are a judgment on the U.S. — and perhaps the beginning of the ‘end times.’
However, Hennings said that even though America has been “much used and much favoured by God,” there is no mention of the U.S. in the Bible — and therefore, “it is unclear what place the American empire will have in the broader history of God and mankind . . . Trying to read the tea leaves of history is complex.” However, he noted, history shows that a decline in the American empire is inevitable — whether that happens in one year or 500 years.
Whatever happens in the short term, Williams said, “the living standards of North Americans will plummet sharply over the next 20 years” because of the long-term problems.
Rowe agreed, noting that eight years ago the U.S. was the leading economic and military power, accounting for 20 percent of the world’s economic activity. He contended that Americans need to come to grips with the fact they will never again have that kind of power. He said this economic crisis is no more “God’s judgment on American society than any other recession.” However, he maintained, “God does judge materialism.”
The real problem, the experts said, is not the debt — but the reasons behind it. North Americans have been “seeking happiness in a materialistic lifestyle,” Williams suggested. “Capitalism has offered people a freedom of choice, as the route to happiness. It has persuaded people to borrow money they can’t afford, to buy things they don’t need.” While promising freedom and happiness, it has led to “bondage and misery. It is a false idol.”
Beukes agreed. “We live in a time when people have put their faith in material things to a degree never seen before. We have abandoned every goal — other than having things.”
He added that this false worship has infected both rich and poor. “When you put your ultimate trust in possessions to give you the things that make life meaningful,” that is “a false idol [which] is bound to fail.”