Paul Solman Goes Back to School

BY Gwen Ifill  November 3, 2009 at 4:54 PM EST

back to school; istockphoto.com

Editor’s note: This week and next, the Business Desk will feature questions from students in three high schools around the country. To kick off the special series, two questions from high school seniors at Central High School in Phoenix, Arizona.

Question: How does it happen that the whole world is in a recession? — Kavion, senior, Central High School, Phoenix, Ariz.

Paul Solman: The whole world isn’t in a recession. China is growing; so is India; so is Brazil. Among them, those three countries alone have something like two-thirds our GDP and maybe nine times as many people as we do.

As to the parts of the world that are in recession — largely in Europe — it looks like the reason is because their citizens borrowed and spent “beyond their means.”

Question: When, why and how did the economy begin to fall? — Chanessa, senior, Central High School, Phoenix, Ariz.

Paul Solman: When: late 2007.

Why: easy credit, easier regulation, a national mindset that we could have it all.

How: Scam artists got into the act and pushed the economy beyond the breaking point. You know Ben Stein, the guy chained to Shaquille O’Neal in those TV ads? His father, a famous economist, is known for Herb Stein’s Law: “If something cannot go on forever, it will stop.”