Tag: financial crisis causes

Housing bubble in US Many economists feel that the current financial crisis started with the housing bubble in the US. Price of houses in the US increased without the right fundamentals. When price of an asset increases without right fundamentals it is bound to fall. This is what happened to the housing market in US. Housing prices increased by more than 100% in the period between 1997 and 2006. With housing prices so high, it became an asset which earned more than 100% return. US investors looked at housing as an investment which guaranteed a high rate of return. But from where did they get money to finance. With easy credit conditions banks were more than ready to provide loans. The model in the mind of investor was simple. Take a loan and buy a house. After some time with the prices increasing sell the house at a premium. With money received pay off the loan and the remaining amount is  [...]

I don’t think there is anyone who has not heard or felt the impact of current financial crisis. In some way or other it has impacted all of us. Some have lost job and some had a pay cut or bonus cut. But how many of us really understand as to what happened and what went wrong. Yes we have all read in the newspapers about the causes of the financial crisis. For most of us it would have been financial jargon that just went over the head. We in simple terms are trying to put entire chronology of events that triggered the crisis. The current financial crisis has been labelled by many as the worst crisis since the Great depression of 1930’s with far reaching implications. It caused many of the big companies which otherwise looked invincible to break like a pack of cards, eroded consumer wealth to the tune of trillions of US dollar, saw contraction in GDP across the countries and broke the  [...]