The cause of this and other downturns
Speculation
Real estate, commodities and technology have historically been
areas of the economy that have triggered an outbreak of the worst aspects of a persistent
element of human behavior — greed.
Too much borrowing, followed by a credit crunch
Buying stocks on margin
with no money down helped cause the Great Depression. Buying houses with little
or no money down has been a major factor in causing the nation’s subprime mortgage
debt woes and housing price debacle.
Lack of regulatory safeguards or enforcement
With each financial or economic
crisis, new government and/or industry rules are typically put in place after a
public outcry. Historically, someone has figured out a way to get around the new
rules, or government has begun to look the other way when the public clamor subsides.
Fear
When market conditions appear to turn unfavorable, or there’s very
unsettling news, an emotional response may set in. Uncertainty prompts some investors
to head for the exit and ask questions later.