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America Credit Crunch
by Jacob Saki
The credit crises did not start today, its start when the oil price jump more then double in a short period of time, instead of gradual increase over three to five years.
The oil price in the USA triggers a devastation serious finance chain reaction.
To simplify these crises we need to look at the basic household consumption in the USA.
If Bob and Linda Wilson have $5,000 net income a month, the oil price has limits their finance freedom in the USA.
Lets analyze how Bob and Linda Wilson, lost their finance freedom while facing hard time.
If we break the down the Wilson's family: net income to monthly budget we can discover the day before Wilson family lost their finance freedom, and the day after they face hard time with the new budget.
Just for the illustration I will input only the necessity of the Wilson's family budget.
Here is the budget before the oil price affected the Wilson family:
Mortgage $2,000
Food $900
Cars and home Insurance $300
Utility $600
Cars fuel $700
Health care $200
Others $300
Total: $5,000
Now let’s see how the Wilson budget looks after the oil price increase to more then double:
Mortgage $2,000
Food $1,200
Cars and home insurance $300
Utility $700
Cars fuel $1,600
Health care $200
Others $200
Total: $6,200
The Wilson family is now short as of today the: $1,200 each month of living.
If we take this figure time 1 millions (as an example) household in US we get: $1,200,000,000.
yes, one billion and two hundred million dollars short in the USA housing loans every month.
This money is unavailable to people of USA, and the need to cuts in the budget is inevitable. Let’s sees where we can cut the Wilson budget.
The Wilson family needs food, so we can not cut on the food. Car fuel is a must to drive to work every day, so we can’t cut here.
Health care is a must, so we canot cut here.
Utility is a must for daily living, we canot cut here. Others we cut: $100 here. Insurance we canot cut.
How about mortgage? The Wilson's can sale the house and move to a small apartment for only $800 a month, this way the Wilson family can survive the hard time.
Mortgage $2,000
Food $1,200
Cars and home insurance $300
Utility $700
Cars fuel $1,600
Health care $200
Others $200
Total: $6,200
The Wilson family is now short as of today the: $1,200 each month of living.
If we take this figure time 1 millions (as an example) household in US we get: $1,200,000,000.
yes, one billion and two hundred million dollars short in the USA housing loans every month.
This money is unavailable to people of USA, and the need to cuts in the budget is inevitable. Let’s sees where we can cut the Wilson budget.
The Wilson family needs food, so we can not cut on the food. Car fuel is a must to drive to work every day, so we can’t cut here.
Health care is a must, so we canot cut here.
Utility is a must for daily living, we canot cut here. Others we cut: $100 here. Insurance we canot cut.
How about mortgage? The Wilson's can sale the house and move to a small apartment for only $800 a month, this way the Wilson family can survive the hard time.
If the house of Wilson family is listed on the market for too long, it’s mean no one is going to buy the house because banks limit lending money.
The Wilson family losing their home due to: default on their home mortgage payments.
The bank now takes over Wilson's home, but unable to sale this home for a fair value market price.
The bank now is in a big problem, he needs the payment of many homes similar to the Wilson's family.
The bank being regulated has to report to the federal government about the problem of short in cash circumstance, meaning credit crises.
Now the government step down and take over or close the bank.
That trigger like: snowball the credit crises we have seen these day all over the country.
The US is the locomotive of the global economy that is the fact.
Now lets go back to the oil issue, since twenty percent of the oil in the USA are coming from other countries that never spend these money back in the USA economy, which make negative impact on USA economy. I mean none of these people use their earning money to buy goods in the USA.
Because the systems in the US are function the way people spending their earning money to move our economy for many generations.
As you can see here how these foreign oil companies with their own people have taken these earning cash dollars from the USA economy.
Because the systems in the US are function the way people spending their earning money to move our economy for many generations.
As you can see here how these foreign oil companies with their own people have taken these earning cash dollars from the USA economy.
In conclusion, the oil skyrocketing price is the number one reason for the credit crises we are now face in the USA.
If only the oil price was increase in a moderate way, for instance in three to five years, then we can prepare ourselves for these crises.
But in life we need to find solutions to keep going, despite these crises.
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