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• Failing to provide really effective stimulus aid for thousands of homeown-
ers who were facing foreclosures but who did not qualify for any of the
new programs.
The results of these mistakes soon led to numerous business and personal bank-
ruptcies, thousands of foreclosures, and thousands of layoffs. It also led to huge
losses in the stock market. There is more that can be said about the Great Reces-
sion, but its impact on software companies was a reduction in sales volumes and
an increase in layoffs of personnel. In order to save money, there was also an in-
crease in offshore outsourcing to countries with low labor costs such as India, Ch-
ina, the Philippines, and Ukraine.
The interlocked factors of the Great Recession are what physicists call a linked
oscillating system . That is, so many things are interrelated that changes in any one
of them ripple through all of the others. Here are some examples:
• Every layoff of a worker who is also a homeowner raises the possibility of
one more foreclosure.
• Every foreclosure puts one more home on the market and increases the
surplus of vacant homes that already totaled more than 10% of all U.S.
houses at the peak of the recession in 2010.
• Every foreclosure lowers the property values of surrounding homes and
drives prices down. The more foreclosures there are in a town or neigh-
borhood, the greater the loss of value for the entire community.
• Many foreclosures of rental properties have the unintended consequence
of putting renters on out the street, even though they had been paying their
rents on time.
• Every foreclosure costs banks more money than they gain by seizing the
property. As a result, foreclosures also raise the risk of bank failures.
Renegotiation of loans would be more profitable for banks than foreclos-
ures, but the mortgages are scattered among various institutions so that
simple renegotiations are no longer possible. Banks seem not to have
grasped the essential math that renegotiation would have been more cost-
effective than foreclosures.
• The combination of job losses and foreclosures cut consumer spending by
more than 25% compared to the peak of 2007, which caused serious dam-
age to retail stores, automobile dealers, restaurants, and other businesses.
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