Economy Homework

This American life is an episode aired on radio that featured Adam Davidson and Alex Blumberg. Adam is a business correspondent working with the national public radio while Alex is the producer of the giant pool of money show. In this September 25th, 2009 episode, the host gets back to individuals they met back in 2008 summer in an awarding ceremony to hear of how they fared since the meeting. One the people they talked to was Jim Finkel. 

In the 2008 dinner, Jim was opportunistic that things had reached the changing point as the spring was over. But on this episode, Jim discloses that they had lost 60 percent, and they made a poor decision on the transactions they did. Jim worked at the Wall Street and the stock market was falling. Adam also got back to Clarence Nathan who worked unsteady part-time jobs, and he hardly made a rough estimate of 45,000 dollars a year and the bank give him 450,000 dollar loan. He claims that he could not lend himself this amount of money. His house was in the process of foreclosure indicating the kind of crisis in the housing sector.

In back 1990s, banks could not let people like Clarence near their money let alone giving him a loan of about half a million dollars. Alex seeks to know what could be the cause of this imprudent partnership between banks and their clients, and he talks to Ceyla Pazarbasioglu, head of capital market research at the international monetary fund. According to Ceyla, banks and insurance companies have saved about 70 trillion. The global pool of money doubled since 2000, and this created more money to invest than there were good investments. The sudden growth of the global pool of money was a result of poor countries like China, India and Saudi Arabia becoming richer from the electronics they made and the oil they sold. These countries banked the money creating the pool of money. Managers wanted to invest this money in low-risk investments but the government securities earned very low rates thus forcing the managers to seek alternative investments. Residential mortgage was the way to for most investors as it promised to be low-risk investment. This led to the emergent of the Wall Street that could link the investors with the world pool of money. The Wall Street received thousands of mortgage checks every month and sold shares from the monthly income to investors. To have these mortgage-backed securities, the likes of Mike Francis needed lots of mortgages. These mortgages had to come from large companies who sold the mortgages to individuals without caring whether they could be able to repay or not. Soon the whole business in mortgage started top decline especially with President Obama’s mortgage relief. The banks that bought mortgage collapsed, as a result.

Though, the global pool of money is not affected. The pool has increased from the 70 trillion to about 84 trillion. The managers who initially looked for new high return have shied away from these kinds of investments and would rather buy the boring but safe government bonds and securities. The governments save these funds with the global pool of funds though no government can replace the lending rate of the global market. The economy might remain in a recession until the investors will be safe again to invest.

References:
This American life (2009)390: Return to the Giant Pool of Money. 

Sherry Roberts is the author of this paper. A senior editor at MeldaResearch.Com in pre written college essays. If you need a similar paper you can place your order from pay someone to write my research paper services.