Looking at the impending recession, it makes one wonder how it actually arises. There are so many factors leading to it, and each recession is accredited to a different reason. The 2001 recession is mainly due to the burst of the technology bubble when there was sudden enthusiasm on the dot coms, and then everyone realizes not everyone is suitable for such a field. Makes me wonder, why the burst of the bubble tea industry in sg didn't really affect the economy much.

Anyway, it has become apparent that the sharp depreciation of housing in US is a major factor in this recession. But the question is how has it affected the economy? Initially I was wondering, so what if it falls? What does that imply? Now after reading a little about it, this is my layman understanding of the situation.

Falling housing prices equates to less confidence in investors and people who really need houses. I mean, it would be stupid to buy houses, when you know that the prices are falling, and you'd get a lower price for a house, say 2 months later. So people wait. The more people wait, the more the prices drop because of less demand.

So what happens to those in the real estates and related industries like construction companies? They'd have less customers and hence will have to report a lower-than-expected profits. The same goes for the banks. This further reduces investors confidence and hence stocks fall. Spending power in these industries also naturally decrease, because of less income, especially those in the real estates.

The idea of banks eluded me initially, until I read about the write-downs they're making and the interest cuts by the federal reserve, in an attempt to salvage the situation. I had many questions. Why are banks implicated with the fall of housing prices? How does the interest cuts help the situation? It turned out that banks are directly linked to the purchase of houses through mortgages and loans. That's one of the major income sources for banks. So if no one's buying houses, the banks lose that interests, leading to lower profits, and hence lower investors confidence. As for interest rate cuts, I presume that is for housing loans, and it's an attempt to increase spending power on houses so as to spur the economy. Lower interest rates mean that buyers can already pay less for a house, and maybe, will be more willing to buy houses.

Being in a sheltered family, the idea of debt really scares me. It really didn't occur to me initially that housing loans and car loans are so common. I mean, getting a loan means paying more than you should for an asset, so why pay more? I guess, not everyone would pay for a car in a single check, instead of installments. Perhaps the idea of loans allow more people to get the things they hope to get earlier, and at the same time, makes them more affordable because you only have to pay a smaller amount each time. Oh well, if I had to buy a house next time, I'd probably have to do the same. That's growing up. No wonder there's all those talk about "I am in a strong financial position. I have a good job, I have cleared my debts early in life..." Debts. An important hurdle in life. Interesting.

On to another topic. Facebook. Sometimes, it makes me wonder why would anyone pay a dollar to give a jpg picture to another person. I mean it's a virtual world, and why would anyone spend real money on a virtual thing, like the picture of a rolex watch, which obviously is downloaded from somewhere on the internet? It doesn't help to say that the developers of the facebook applications are software engineers and hence do not have business acumen because many of these popular applications are run by companies! Otherwise, how would you have all those survey offers popping up.

Oh well, perhaps the value of facebook is really a subjective issue. Some people may really spend a dollar to get something they really want and give to someone whom they really want to give to. After all, it's only a dollar. To me, I find that a little too high. Maybe if it's a dime or a quarter, I'd probably toss them in. And I seriously think that if they would probably make more if they reduce their prices to a dime or two. After all, that was the same issue with online song purchase. Itunes found that they could make a lot more profit if they sell songs at 99c a song as compared to somewhere like 2.99 a song. But I'm not stupid as to go buy songs this way lahz... After all, I download my songs from baidu. haha~ And I'm not sure whether itunes have chinese pops anot in the first place. So really, maybe US values things a little too high, or maybe, I'm the one with no business sense and values things lower than they should. In any case, I'm not interested in paying a dollar for a virtual thing. After all, how trustworthy is the secure transaction, especially if the developer is still a college kid?

Before I go off, I shall just disclose my lame joke.

If friends keep in contact with one another through friendster.com, then brothers of course keep in contact with one another through brother.com lahz...

haha~ who knows, if I really work for brothers next time, my brothers can really find me there.