It is hard to appreciate how much damage to the global economy by the US Subprime mortgage sector.
Sometimes, people ask – Where has all the money gone? – someone must have been profited.
By looking at what happenned to the US subprime sector, we can understand where most of the initial losses came from. (IMF estimate losses of around £1.3trillion).
These losses from the subprime mortgage sector in the US were then spread throughout the rest of the financial system because other banks bought into these mortgage debt bundles.
Just as important as the initial losses has been the impact on financial confidence which has caused a drastic change in market sentiment.
The full article is here – Financial Crisis explained
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[...] Subprime housing crisis [...]
[...] Credit crunch (see: mortgage crisis explained) [...]
[...] Housing Boom and Bust. In the US, cheap credit, inflow of capital from Asia, and lax regulation all contributed to a boom in the US housing market. In particular there was a rise in unorthodox mortgage lending. These sub prime mortgages were often rebundled as mortgage securities which were sold around the world. When mortgage defaults started to rise in US, banks started having to write off bad loans. Banks around the world lost money and so became reluctant to lend. For more: See sub-prime mortgage crisis explained [...]
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