Analysis of America’s Problem & Solution For Grade Four

By Shlomo  Maital   

  

   

 

 Will Smith’s 10-year-old son jaden

My fellow economists specialize in complicating what is essentially very simple. 

   Can we simplify America’s current slumping economy, and explain a solution, at a level that a 10-year-old (Grade Four student) can understand?

   Let’s try.   If you know a 10-year-old, try this on them.

   “So, some pretty smart people say they did a study and they found that ordinary American families have gotten a lot more poor between 2007 and 2010. (2007 was when you were five years old).  *  Why?  Well, about seven American families in every 10 own their own home.  Mostly their wealth is in their homes.  And lately, since you were 5, the price of those homes has gone down a whole lot.  So, if, say, your family had a $500,000 home in 2007, then just three years later, it would be worth about $300,000.   That’s a lot of money to lose. It’s like several years of your dad’s or mom’s salary.  So people feel poor, because of that, and they don’t spend and buy things and take trips and go shopping.  So, when they don’t spend, people can’t find jobs to make the things people would buy if they did spend.  That makes people even poorer…and we are on, say, a roller coaster, going down, and it never seems to go up.  So, how do you get the roller coaster to go up again?  Change direction. If people aren’t spending because they feel they are poor, make them feel rich again. How?  Make their houses worth more?  How?  Get banks to stop selling houses that they grab because the people living in the houses can’t pay the bank what they owe it.  How?  Well, make the banks sell the mortgages to the people who run the city.  And then, stop kicking people out of their homes and stop selling those homes, so the price of homes can go up again and everyone can feel richer.  It’s pretty simple, right?   So, if it’s so simple, why don’t all those smart people do something about it?  Well, Picasso (a great painter) once said it took him his whole life to learn to paint like a child.   It’s taking all those smart guys and gals a whole life, just to learn to think like a child…and they still haven’t figured it out yet.  Hope they figure it out soon!”

  •  The Federal Reserve released a study showing that the median net worth of AMERICAN FAMILIES fell by 39% between 2007 and 2010, to $77,000, a level last seen in 1992. This was except for the top 10% of earners, whose wealth rose slightly. Most of the decline was a result of the collapse in the  housing market.
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