The Global economic crisis of 2006 that happened in the US . The underlying causes explained.

1. Why the Global Economic Crisis
Occurred in 2008?
By,
Jyoti Ranjan Sahoo
UM14203

2. The Crisis build up
The crisis started long back with the rise of interest in real estate.
The home seekers became home owners with a small down payment and
monthly emi payments.
Loans at interest
Emi
Everyone is happy.

3. Lucrative Real estate.
The real estate began to attract investors and investment bankers.

4. The Brilliant idea
Bank made profit from
the transfer and got rid of the
Mortgaged estate.
Federal Reserve loans
1% interest
Transfer of mortgaged estate
The investment banker has a debt to Fed reserve which he needs to clear.
“ Emi’s take time, lets sell these houses, but to whom?”

5. Collateralized debt obligation
A lucrative deal for investors sitting idle on
huge pile of money . The investment
bankers provide the investors returns with
different returns.
They classified their debt in terms of
retuns.

6. Everyone Happy…until…
The investment banker has passed his debt to investors by making a huge profit.
The investors make profit with the increase in real estate prices.

7. EMIs are defaulted
No worries , Lets find another family who can pay and kick the current one out.
To make the houses more lucrative the houses are mortgaged to sub prime customers,
Without a down payment.

8. Blunder
• Sub Prime customers defaulted leading to much more vacancies. Vacancies
caused drop in prices.
• The Prime mortgage customers decide to Leave the house, causing even more
vacancies
Why am I paying so
much for a
depreciated asset??

9. No buyers…..huge debt
• The investment banker is not able to attract any investors.
• Huge debt gets piled up.
Lehman Brothers declares bankruptcy!

10. Thank You
• References: Youtube, Wikipedia