Sunday, February 5, 2012

Can you please explain in layman terms the cause of the Global Financial crisis?

I know it's a bit complicated. Break it down using layman ( non-industry language) It helps to get the basic general concepts first.Can you please explain in layman terms the cause of the Global Financial crisis?Basically, it has all happened due to the Real Estate Boom in the US.

Wherever Real-estate is concerned,there are 3 types of customers buying it

1.The real customer - generally a middle class man buying a house

2.The unreal customer - A broker or dealer or an investor, who wont actually use the Real estate

3.The bank - Both types take loans from the banks



Now there is a limitation for Type1 customer.

Say some property costs $400.

1.The real customer can take a loan from bank and pay that amount.

2.The unreal customer has more money to invest he says he will pay $500 for the property.

3.As people were very sure that real estate prices will definitely rise,Type2's group together and buy the property

at even a higher rate as there is competition between Type2 customers, making the property price rise as high as $900, $1000.

4.Even banks were careless while giving loans to such Type2's, so they gave a lot and lot of loans 2 such people.

PART II

This kept happening and properties were bought at enormous prices 4-5 times their original prices. At one point the

number of Type2's became more than Type1's, so now no ones using the property people are just buying it.

SO at one point of time it was panic spread that prices of property will go down,these unreal cust. started selling the property

but now no one would buy as everyone wants to SELL.

So properties were sold at prices lower than their original prices $200-$300 by the real customers.

Eventually Type2's became bankrupt bearing heavy losses, they defaulted the heavy loans taken from banks, which in turn made US banks bankrupt.

Which in turn affected everyone related to those banks, may it be Satyam Soft solutions or FII's in Asia/India drawing their money back

to save their losses in the US.

So it has become a world economic crisis.

Hope that's enough.Can you please explain in layman terms the cause of the Global Financial crisis?
maybe the cause are the global elite re-engineering society for a new world order, you know how it goes, problem-reaction-solution. They create the problem, people %26amp; countries react accordingly and then they offer the solution. The criminal bankers out there, are holding the world ransom and are saying that if we don't bail them out, they'll cause a recession.



Lets not forget that we were told by George Bush that there were weapons of mass destruction in IRAQ - how many did they find?.........no WMD's were ever found! What are we being setup for now?

Can you please explain in layman terms the cause of the Global Financial crisis?There are many reasons but one of the most prominent reasons is banks lending money to people who have no chance to repay the loan.

An example is in recent years banks lending 110% for mortgages hoping that the value of the property goes up and they make lots of money.

If the house owner fails to make the repayments the bank repossesses the property and then tries to sell it but will not get back what they loaned out in the first instance. So a 拢200k house has a 拢220k mortgage and with house prices falling the house is now only worth 拢180k so the bank loses 拢40k.Can you please explain in layman terms the cause of the Global Financial crisis?
Ok...listen to this Story.Some people cannot afford to BUY houses with their own Money. Such people take LOANS to buy houses.

What the bank does while giving loan? it sees the financial strength of the person. WHETHER THE PERSON IN FUTURE WILL BE ABLE TO REPAY THE LOAN TO THE BANK?

If the bank is satisfied that the person over a period of time will be able to repay the loan, the Bank will give them the LOAN. But as a precaustionary measure ,the BANK will have the papers of the HOUSE (for which the loan has been given) with itself. This is only because, in case for some reason the person does not relay the loan, then the BANK WILL SELL THE HOUSE and recover the MONEY.



What will happen if the bak does not check the FINANCIAL STRENGTH of the person brfore giving the LOAN? theRE are chanves of the person defaulting (not paying back) the LOAN. In that case the Bank will havve to sell the house to recover the money.



In US a number of BANKS gave LOANS TO people WIHTOUT CHECKING THEIR FINANCIAL STRENGTH.

Result all such people, did NOT REPAY their loans.

The banks had to SELL their Properties. BUT THE PROPERTIES will the banks are so HUGE and in large Numbers, that there are NO TAKERS for it.

That is to say, BANKS ARE NOT FINDING BUYERS FOR THE PROPERTIES.



Banks moeny is blocked in the propoerties. So banks are Losing LIQUID FUNDS.

Supply of properties is HIGHER THAN the DEMAND for properties (houses), so REAL ESTATE prices are falling.



This problem is being faced by many major banks in US. US being a major developed country, has investments across the World. Since the US banks are facing FUNDS problems, they are withdrawing funds from every-where they have invested (Asia, EUROPE, pACIFIC rEGION)

Result- the overall Global Economy is tumbling due to HEAVY FUNDS OUT-FLOW!

Can you please explain in layman terms the cause of the Global Financial crisis?Not complicated at all. Just the opposite, nothing can be simplier. Ever tried to spend more than your income? The result is always a financial crisis.

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