How Did We Get Here?

By Andrew Paparozzi
In September 25, 2008

With debate continuing on giving the Federal government authority and a significant amount of money to purchase distressed securities from financial institutions in order to inject liquidity into the financial system and restore some confidence, we shouldn’t ignore how we got to this point—the financial system on the verge of freezing and credit drying up. There is plenty of blame to go around. Government, financial firms, and individuals all played their roles in creating the financial turmoil we find ourselves in today. When we dissect everyone’s actions, here are the common themes behind the mess—chasing the hot market and jumping into unfamiliar territory.

As the housing market began to percolate, credit became easier to obtain, and individuals were given more and more opportunity to overreach. Money just kept pouring into housing as mortgage-backed securities were being snapped up as soon as they were created. From mutual funds to hedge funds and everyone in between, who could pass up a good return on a safe bet? As long as home prices were rising, everything looked great. Individuals that were stretched would just refinance and their mortgages would become more affordable. One minor problem—no one repealed the law of supply and demand. As builders overbuilt and home prices began to recede, it all unraveled. The lesson: If something seems too good to be true, it probably is.

Other lessons we would do well in learning: Because a market is growing rapidly, doesn’t mean it is right for everyone. Carefully weigh all the pros and cons before making a decision. And, at the very least, be familiar with what you’re getting into. Even after all the dust settles and we somehow manage to avoid a deepening of the financial crisis, we will still be dealing with a weak economy, weak sales and a classic profit squeeze. And even after the economy begins to turn around, we will still be dealing with ongoing structural changes in the commercial printing industry, and the economy in general. This is the focus of the upcoming NAPL State of the Industry Report 2009.

Andrew Paparozzi
Joseph Vincenzino
Kong Wang

Andrew Paparozzi

Epicomm's Andrew Paparozzi, Vice President/Chief Economist, is well-known for his accurate and thoughtful discussions on the economy and US commercial printing industry. A foremost author and speaker on economic business trends in the printing industry, Paparozzi heads Epicomm's Printing Economic Research Center.

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