Daily popular science knowledge: subprime mortgage crisis

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Subprime mortgage crisis

Interpretation

INTERPRETATION

The full subprime mortgage crisis refers to a financial crisis that occurred from 2007 to 2008. Its root cause is that the bubble burst in the U.S. real estate market and subprime bond market. From 2003 to 2006, the United States frantically issued mortgages to people who were unable to repay, and housing prices rose. As a result, the price bubble law was broken in 2007, causing the life-saving financial system to collapse like Domo Laochanglian: Book Volume in 2008 Brother's betrayal triggered global financial scandal.

Background

EXCHANGE RATE DEPRECIATION

In the late 1990s and early 2000s, the real estate market in the United States showed rapid growth. In order to meet the growing demand, banks began to promote the growth of the real estate market by issuing a large number of low-interest, high-risk loans. These loans are called "subprime mortgages."

As subprime mortgages continued to enter the market, banks and other financial institutions began to package these loans into securities and then sell them to investors. These securities are considered safe investments because they are invested in real estate.

However, in fact, not all of these securities are backed by stable real estate. Many of them are In this case, the house price fell, the homeowner failed to repay the loan and the bank became illiquid, and the investors lost all their money.

Consequences

EXCHANGE RATE DEPRECIATION

The consequences of this crisis are catastrophic. Financial institutions around the world have suffered huge losses due to the collapse of the subprime mortgage market, and many companies and individuals have even faced bankruptcy. The crisis also led to a global stock market crash, rising unemployment, and a global economic recession.

The subprime mortgage crisis can be compared to a neighbor who paid a lot of money to buy a house, but in fact he was unable to repay the loan. The bank packaged the loan into a good bond and sold it to other investors to spread the risk, but when the worst lender couldn't repay the debt, the whole system collapsed. It was like a treasure scam from the beginning. Based on your falsehood,

Examples

EXAMPLES

Suppose you are a candy man and you borrow 10 yuan from a bank

01

Purchase raw materials to make accurate fruits. The bank knows that your credit is not very good, so they give you a fixed interest rate, for example, it is 20% per month. You start to get results, and the business is not good, so you pay off the loan in a hurry, and you lose a lot of money. So you invest all your money in advertising and promotion activities, which can increase your business, but suddenly, a rival comes into play and they offer more to make it better

Prices, your sales start to drop, and because your sales are sluggish, you can't pay for advertising and promotions, and you start to gradually increase your liabilities.

Eventually, you find that you owe a lot of debt and can't pay it back. Banks can no longer lend you any money because they realize that your credit has been compromised. This illustrates the basic idea of ??the subprime crisis: bad credit loans in a high-risk loan market, which ultimately led to financial Market rupture.