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High energy costs triggered recession

To the Editor:

The high foreclosure rate, beginning in 2006, led to the bank failures in 2008 and the following recession.
The question is, "Why were there so many foreclosures?"
The answer is, "High energy prices caused the majority of these foreclosures." As long as the unemployment rate was 5 percent and the cost of gasoline and home heating oil was relatively low, low-income families and many small businesses could meet their monthly mortgage obligations. However, when the price of gasoline and home heating oil approached $4 per gallon, these mortgage holders could no longer meet their monthly mortgage obligations. The $400-monthly heating oil and gasoline payments were just too much for low-income families, and small businesses could no longer afford to pay the monthly energy bills.
Low-income families fell behind in their mortgage payments and many small businesses began to lay off workers. Nationwide, the foreclosure rate and the unemployment rate rose. Mortgage-backed securities lost all their value, banks nationwide began to fail and the recession began.
What we need today is elected officials who will solve the energy problem, improve the business climate and reduce the unemployment rate. This November, I hope we choose the right people.

Kenneth Berwick
Smithfield


Comments
1 comment on this item

Actually that is completly incorrect. Perhaps if home buyers kept within a budget and kept the percentage of their monthly mortgage expense to just 38% or less of their income they would be able to weather any inflation, or fluctuations in commodities on the market. The bottom line is morgages should never have been given to many people. The banks were not looking close enough at the applicants, or didn't care. In addition, adjustable interest rate deals which looked good on paper and got people into homes was fine until the rates changed!

Economics is quite simple. Life well below your means, do not rack up debt, invest, and save. People just want what they shouldn't be buying because they cannot really afford. Cut the charge cards up, rent until you really can afford to own, stop buying expensive newer cars every few years, don't lease (waste of money), don't buy that 65" hd tv if you don't have the cash....

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