Please answer the following question(s) below based on assigned reading(s) from the text and the following articles on government control policies:

Prelude to Questions

Who was responsible for the last recession (2007 - 2008 financial crises) Banks (lenders) or Consumers (borrowers)?

As the diagram on page 384 depicts banks are money brokers. You and I deposit our paychecks in banks (for safe keeping). Some of the money we spend and some of the money we try to save (for future purchases and retirement!). We as consumers shop for the best deals we know that if bank "A" is giving more interest to its depositors than our bank "B" we will move our money from bank "B" to bank "A" for the greater return on our investment. So banks have to compete for our business they have to maximize profits to pay us the highest interest possible or we will go elsewhere. How do banks make profits? By taking the money you have deposited and lending it to someone that promises the bank they will pay the money back with interest.

So are banks necessary? How many of us can afford to pay cash for a home purchase or even a car? Not many of us can. So are banks necessary? You bet they are! Without banks our economy would come to a screeching halt. So leading up to the 2007- 2008 financial crises borrowers went to banks and asked the banks for money so they could purchase a home (since they could not pay cash for the home). The borrowers signed a contract (legal document) guaranteeing they would pay the banks back. In 2008 the recession that started in December 2007 steamed roll. We had high energy prices (over $4.00/gallon for gasoline) there was a mandated minimum wage increase (both labor and energy costs went up for businesses). So during recessions we know that businesses have to cut costs to survive or they go out of business. So layoffs occur and borrowers that lost their jobs can no longer pay their mortgage that they legally promised to the banks. As with any business cash flow is important. Without a stream of incoming cash (because of mortgage defaults) banks no longer can lend to consumers or businesses.So this "snow ball" effect causes the recession to worsen.

Articles:

Government Policies Caused The Financial Crisis And Made the Recession Worse

http://www.heritage.org/government-regulation/commentary/government-policies-caused-the-financial-crisis-and-made-the (Links to an external site.)

How The Government Created A Financial Crisis

https://www.forbes.com/sites/peterferrara/2011/05/19/how-the-government-created-a-financial-crisis/#622febf721fb (Links to an external site.)

Shining a light on the cause of the Great Recession

http://www.washingtontimes.com/news/2015/feb/9/richard-rahn-peter-wallison-blames-great-recession/ (Links to an external site.)

New Study Finds Democrats Fully to Blame for Subprime Mortgage Crisis that Caused 2008 Financial Disaster

http://www.thegatewaypundit.com/2012/12/new-study-finds-democrats-fully-to-blame-for-subprime-mortgage-crisis-that-caused-financial-collapse/ (Links to an external site.)

More Government Equals Less Growth, The Facts Are In

https://www.forbes.com/sites/jeffreydorfman/2013/12/10/more-government-equals-less-growth-the-facts-are-in/#24bad6a037b5 (Links to an external site.)

Trump signs executive order to cut costs of federal government https://www.cbsnews.com/news/trump-signs-executive-order-to-cut-costs-of-federal-government/ (Links to an external site.)

Question to answer:

1.) Who was responsible for the last recession (2007 - 2008 financial crises) Banks (lenders) or Consumers (borrowers)?

2.) Should Banks be forced by the government to make loans to riskier (low income) homeowners? Explain why this is or why this isn't a good policy.

3.) Disposable income is defined as the amount of income we have to spend or save after taxes. Redistribution is where government taxes (confiscates) money from individuals and businesses and spends on projects that the politicians deem are warranted. When the size of government increases it needs more tax dollars to operate which reduces our disposable income further and lessens our freedom of choice. When taxes increase politicians are saying to individuals and businesses "we know better how to spend your hard earned money than you" . In terms of government economic policy, explain why you believe the size of government should increase (have more control of our lives) or why the government size should decrease (more freedoms for individuals). Include your thoughts on, "is it the role of government to attempt to make people happy? Or "is it the role of government to reduce barriers (increase freedoms) for individuals so they may prosper and find happiness on their own (take personal responsibility)" ?