Mark Alexander A. Salvador
SPENTREP F10
Financial Meltdown in USA
The StoryMajor Events of the Decade
Dot-com Bubble9/11 AttacksAfghan and Iraq Wars
Effects on the MarketsSlashed Interest Rates
The China FactorJoined the WTOMassive shift of global manufacturing to the
nationLow-cost Chinese goods flooded markets
The StoryGlobal Demand for Oil BoostedUS Trade DeficitInvestment Outlet was the USA
Investors looked for safe-haven investments such as US Treasuries
Subprime MortgageA type of mortgage that is normally given to borrowers
with low credit ratings. Since the borrower has a lower rating, a conventional
mortgage is not offered because the lender views the borrower as having a larger than average risk of defaulting.
Lenders often charge higher interest rates on subprime mortgages in order to compensate for carrying more risk.
The StoryWall Street Produces Complex SecuritiesIndividual Loans could be Securitized Lenders could Originate Loans, Resell and Use
the Proceeds to Make More LoansHome Buying Spree
Low Borrowing CostsEasy Access to Credit
Making Significant Returns through Buying and Selling
The StoryBenefits
Produced JobsHouse Becomes Largest AssetLiquid
Signs of the Bubble BurstDeclining House PricesHigh Interest RatesMortgages Could Not be PaidDefaultsMarkets of Mortgage-Backed Securities Shut
Down
Effects of the FiascoMoney Stopped FlowingBanks Began Reporting Losses on their Mortgage-
backed HoldingsBanks Shrank from Doing Business with Each OtherInsolvencies and Bailouts
Bear StearnsFannie Mae & Freddy MacLehman BrothersAIG
EffectsUnemploymentGovernment Deficits
Effects of the FiascoEffects (continued)
High PricesCost on WelfareDepreciation of Currencies
Philippines and the Rest of AsiaEmerging Economies Performed BetterBenefits of a Conservative Banking SystemHigh Population Fuelled ConsumptionCurrency AppreciatedUSD Lost Some Purchasing PowerLocal Goods and Services Became Expensive
In Relation to EntrepreneurshipThe need to be updatedGreed is cancer
THE END
Thank You!
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Global Economic Crisis. United States of America: McGraw-Hill, 2010.
Zandi, Mark M. Financial Shock: a 360 look at the subprime mortgage implosion and how to avoid the next financial crisis. New York: FT Press, 2009.
“Definition of Subprime Mortgage.” Investopedia. 23 February 2011 <http://www.investopedia.com/terms/s/subprime_mortgage.asp>.
“Ireland, Greece, Spain, Portugal: a Same European ‘Peripheral’ Problem?” Ireland after Nama. 26 February 2011 <http://irelandafternama.wordpress.com/2010/11/24/ireland-greece-spain-portugal-a-same-european-%E2%80%98peripheral%E2%80%99-problem/>.
Bibliography“ The Lesson of Dubai: The Crisis is not Over.”
Time. 26 February 2011 <http://www.time.com/time/business/article/0,8599,1943392,00.html>
“Q&A: Greece’s Financial Crisis Explained.” CNN. 26 February 2011 <http://edition.cnn.com/2010/BUSINESS/02/10/greek.debt.qanda/index.html>
“The Fuel that Fed the Subprime Meltdown.” Investopedia. 23 February 2011 <http://www.investopedia.com/articles/07/subprime-overview.asp>
Bibliography“US Subprime Market.” Economy Watch. 26
February 2011 <http://www.economywatch.com/us-subprime/>
“What Caused the Subprime Mortgage Crisis.” About.com. 24 February 2011 <http://useconomy.about.com/od/criticalssues/tp/Subprime-Mortgage-Crisis-Cause.htm>
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