Task 8 Page 169

c) Find the article "Where Did All the Money Go?" on our website. Write a summary of the main points of the article.

The article was about the world economy, and how production, trade and investment has decreased the last couple of years. This has also lead to increased unemployment, which can be a big problem to the government, because this lead to less taxes. Poverthy has become a bigger problem than before, when the economy was "booming". So what happened?

A lot of people blame previous Prime Minister in the U.K., Margaret Thatcher, and previous in the U.S., Ronald Reagan. They believed in the free market, and removed a lot of expensive government programs and etc. They removed expensive programs and regulations standing in the way for private initiative. This lead to that some people became very rich. Less successful people struggled, because they no longer got the same amount of support from the government.

In the beginning of the 21st century, a whole new set of financial institutions has entered the arena. They do not make money by loaning out money. They make their profit by buying and selling stocks and etc. They use leveraging, which usually involves buying more of an asset by using borrowed funds.

Banks across the United States invested money in financial investment houses and the money market. This showed amazing profits. One reason was a new kind of known as "derivative". It is a kind of investment object that has been "bundled" with others of its kind to reduce the risk of losing money if one of them should fail.

By 2007 the price of houses in the United States began falling. The investors' profits turned to losses. A lot of financial houses were forced to loan money, to cover their losses, but no one woul lend them money. The crisis in the United States swept through the global free market, and governments pumped tax money into the global free market system.

So the real question is: how can a free market consumer economy remain stable and productive if it can't provide enough income for it's consumers to buy all the goods it produces?

Sources:
http://access-socialstudies.cappelendamm.no/binfil/download.php?did=68773 (14.11.14)
http://en.wikipedia.org/wiki/Leverage_(finance) (07.01.15)
Page 169 in Access