In simple words can u explain whats all this global financial crisis about?

banks and the government have been in the news for the past month. and about america. whats happened in the last few weeks. please explain to me write as much!In simple words can u explain whats all this global financial crisis about?The banks have been recklessly lending billions of pounds to high risk customers who now cannot or are struggling to pay the banks back, leaving the banks short of ready cash. As most of the economy is driven by people and businesses lending money from the banks the economy is coming to a grinding halt. Hence this is why the government is lending the banks billions of pounds in cash.In simple words can u explain whats all this global financial crisis about?
corporate greedIn simple words can u explain whats all this global financial crisis about?Very briefly.

This started with US 'sub-prime' (a euphemism for very risky) mortgages that over valued property and were sold to people who did not have the income to maintain payments. Frequently lenders paid others to take the risk of non-payment by the use of credit default swaps that represented money for nothing in boom times but vast liabilities in bad times. These and other derivatives were traded by people who lacked the accounting and actuarial knowledge to understand the instruments and hence their values and potential liabilities. The situation was exacerbated by the payment of vast bonuses to people who made unrealisable profits by gambling with investors and depositors money.



Following the Enron bankruptcy in 2001, legislation was introduced requiring many financial assets to be valued on a worst case scenario rather than the normal accounting 'going concern' basis used in business. When the economy slowed, this had the effect of forcing banks to deflate their balance sheets, causing concern about their viability. This reduced confidence and banks stopped lending to each other causing the current credit shortage.In simple words can u explain whats all this global financial crisis about?
Companies gave lots of mortgages for homes to people that couldn't pay it back. The companies said "we don't care. We'll just foreclose on the homes and sell them in order to get our money back and then some." Property values started to plummet so these companies knew they were up the creek, so they bundled up these bad investments and sold them to other companies guaranteeing that if the buyers of the bad debt couldn't collect the money, they would make up the difference (credit default swaps). Well, the property values continued to plummet and all concerned started losing alot of money necessitating a "rescue" from mostly the U.S. Government (at last count, a $700 billion dollar package which will eventually go up to probably about 2 trillion dollars). Here come the Feds to the rescue, except the Feds are already 10 trillion dollars in debt, so they do't really have the money either. But they can raise it by writing more treasury bonds (more debt for future generations). Strangely, our two presidential candidates both want to cut taxes and raise spending (go figure).



In the meantime, the stock value of all the above financial companies started to plummet which, combined with the debt, forced heavy lay-offs. Plummeting stock value meant everyone's retirement plans went to pot, beside the fact that credit (borrowing money) became alot more difficult for all, creating even more of a mess (see how the problems spiral down?). In the meantime, American automobile and airline companies are in big trouble (with potential massive lay-offs) unless the government comes to their rescue too. The Government is not only lending money to these companies, but actually taking them over to a certain extent. So the concept of "de-regulation" (and arguably even "Capitalism") is basically out the window. The stock market may have responded well to today's news of more government help and a heavy investment by a Japanese bank in Morgan Stanley (an investment company) but we're in deep trouble with all this debt.



There's alot more to it, but I think the above is a good start.In simple words can u explain whats all this global financial crisis about?Loss of confidence in banking (which is a legalised confidence trick) has caused banks to collapse.



This collapse was precipitated by the sub-prime lending fiasco: the banks lent lots of money to people who had little hope of repaying it.



Because there's a global economy, the effect has spread from the US other countries, notably Europe.



National governments are now trying to restore confidence in the banks by propping them up in various ways. They are of course using public money to do this. Some of this money must ultimately come from taxpayers.



If the trick works, confidence in banking will be restored. If not, all hell will break loose, financially speaking.



At the same time, oil and food prices have been rising, causing global inflation, but this is a separate issue. Hopefully prices are now on their way down as demand drops.

In simple words can u explain whats all this global financial crisis about?
Well I agree with what has already been said on this subject by some of the contributors. But there is also another reason that lies at the depth of this crisis that have we now have before us. One that isn't so obvious and one that has not been considered yet.



To get a better idea of what I am talking about see www.laitman.com There is a wealth of information on the site from a man who has a very interesting take on what exactly is happening to us, why its happening and more importantly what we can do about it.