2008 was rather rough for the economy of the United States. In many ways, the problem which the state encountered in 2008 reminds of another crisis, which was much stronger and had much more dreadful consequences, yet developed on very similar premises as the one of 2008.
The notorious Great depression that struck the United States in 1929 also concerned the issue of mortgage, increasing prices and the intense feeling of financial insecurity. As a matter of fact, there are a number of features which are characteristic of both crises in question. According to Salisbury, the results of the 2008 crisis were just as disastrous as the situation during the Great depression: “the economic circumstances in the United States now and during the 1929-1940 have several elements in common” (Salisbury 23).
One of the common issues with both crises was the mortgage problem. Despite the fact that mortgage agencies are rising prices (Nanto 24), in 2008, people still continued to pay rent for their houses, which raises the question why people followed the attempts of the mortgage agencies to profit from the crisis.
As a matter of fact, the answer to this question is rather simple. First of all, it is important to mention once again that dishonest brokers created the illusion of their companies being completely transparent, thus, making people believe that what they would get the services which they would pay for (Zandi 187). Thus, even as the price for the rent increased, people would still pay for the mortgage, being completely sure that they would not be left without their homes.
However, as soon as the price rose even higher than ever and the people who lost their jobs due to the crisis could not pay for the rent anymore, the houses went into foreclosure, thus, making people lose their hearth and home. Logically, the people who have suffered because of the swindlers who offered the mortgage which could be sustained only in the case the house was flipped should have been more cautious.
Indeed, the rapid increase of the price for the mortgage should have been taken with a grain of salt by the people who rented houses. However, apart from the psychological factor mentioned above, there were also the economical and the financial ones. During a crisis, it must have been extremely risky to switch from one mortgage to another in the search for a more trustworthy company.
Honest mortgage companies and swindlers are quite hard to tell apart to begin with; in addition, when changing the mortgage company, one is most likely to come across even higher prices, which was quite undesirable for the people who were struck with the crisis. Hence most of the problems connected with mortgage and the rising prices for it stemmed.
Despite the fact that there obviously were the ways to deal with the mortgage issues other than following the policies of the mortgage companies which decided to raise the money for the rent, the reasons for people to keep paying the rent money is still understandable. Mostly because of the instability of the economical situation in the country and the fear that the change of a mortgage company will be only for the worse, people complied with the outrageous rules imposed on them by the mortgage companies.
Works Cited
Nanto, Dick K. Global Financial Crisis: Analysis and Policy Implications. Harrisburg, PA: Diane Publishing Co.
Salisbury, Philip S. The Current Economic Crisis and the Great Depression. Bloomington, IN: Xlibris, 2010. Print.
Zandi, Mark M. Financial Shock: A 360º Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis. Upper Saddle River, NJ: FT Press, 2009. Print.