Why Global Financial Crisis Happened
Why Global Financial Crisis Happened?
In short, Overdose: The Next Financial Crisis tells the events that leading up to the Global Financial Crisis that happened in the late 2000 or to be exact, around 2007 to 2008. The financial crisis starts when Federal Reserve cut its key interest rate to the lowest level and pumps trillion of dollars into the sick banking system. This action has actually led to a bigger problem that affected the entire world. There was a bubble in real estate in the U.S and certain countries such as Spain, Ireland, and U.K. When the bubble burst, huge problems in the securitized mortgage market and in the real economy arose. In spring 2001, the Federal Reserve started to lower the interest rate from 6.5% to 1.75%. In 2003, the interest rate has been lowered to 1% and it remained there for a full year. The government is said already remaining without fuel to feed the economy. They can save the bank, but there is no one that can save the government itself. Every time bank makes a loan, new money is created. In the run up to the financial crisis, banks created huge sums of new money by making loans. Hence, in like 7 years, they doubled the amount of money as well as the debt in the economy.
They have created too much money too quickly until it has become a big problem in economy. They gave loan to anyone and the market even coined the term NINA loans (No Income, No Asset, No Problem!).
Banks created too much money and then used this money to push up house prices and speculate on financial markets. Furthermore, they have created FannieMae and FreddieMac, a privately owned, government sponsored mortgage houses to insure loans for people who couldn’t get them on the open market. Along 2007 to 2008, only 8% of all the money banks created went to businesses outside the financial sector. Around 31% went to residential property, which pushed up house prices faster than wages. Lending large sum of money into the property market has
In short, Overdose: The Next Financial Crisis tells the events that leading up to the Global Financial Crisis that happened in the late 2000 or to be exact, around 2007 to 2008. The financial crisis starts when Federal Reserve cut its key interest rate to the lowest level and pumps trillion of dollars into the sick banking system. This action has actually led to a bigger problem that affected the entire world. There was a bubble in real estate in the U.S and certain countries such as Spain, Ireland, and U.K. When the bubble burst, huge problems in the securitized mortgage market and in the real economy arose. In spring 2001, the Federal Reserve started to lower the interest rate from 6.5% to 1.75%. In 2003, the interest rate has been lowered to 1% and it remained there for a full year. The government is said already remaining without fuel to feed the economy. They can save the bank, but there is no one that can save the government itself. Every time bank makes a loan, new money is created. In the run up to the financial crisis, banks created huge sums of new money by making loans. Hence, in like 7 years, they doubled the amount of money as well as the debt in the economy.
They have created too much money too quickly until it has become a big problem in economy. They gave loan to anyone and the market even coined the term NINA loans (No Income, No Asset, No Problem!).
Banks created too much money and then used this money to push up house prices and speculate on financial markets. Furthermore, they have created FannieMae and FreddieMac, a privately owned, government sponsored mortgage houses to insure loans for people who couldn’t get them on the open market. Along 2007 to 2008, only 8% of all the money banks created went to businesses outside the financial sector. Around 31% went to residential property, which pushed up house prices faster than wages. Lending large sum of money into the property market has