The Global Credit Crisis

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The Global Credit Crisis

  1. 1. By Sameer
  2. 2. ONE Q: HOW IT STARTED ? 1 <ul><li>American Banks Have Excess Pool Of Funds </li></ul><ul><li>They Formed Institutions Named </li></ul><ul><li>Foreign Institutional Investor </li></ul><ul><li>Entered The Emerging Markets With Lots Of Money </li></ul><ul><li>Resulted In Unnatural Growth Of Stock Markets Globally </li></ul>
  3. 3. <ul><li>Decades Of Outsourcing Have Devastated The American Manufacturing Base. </li></ul><ul><li>As A Result The Monster That The USA Has Created In The Name Of Outsourcing And Offshoring, Has Grown So Big And Powerful, That It Is Now Impossible For The US Companies To Become More Competitive Than These Low Cost Countries. </li></ul>
  4. 4. ONE Q: HOW IT STARTED ? 3 <ul><li>Bursting Of The United States Housing Bubble </li></ul><ul><li>Reason: High Default Rates </li></ul><ul><li>Subprime Losses </li></ul>
  5. 5. HERE COMES FINANCIAL COMPANIES LENDING MONEY TO THESE PEOPLE
  6. 6. <ul><li>Mortgage Backed Securities (MBS) </li></ul><ul><li>MBS is an asset-backed security whose cash flows are backed by the principal and interest payments of a set of mortgage loans. </li></ul><ul><li>Collateralized Debt Obligations (CDO) </li></ul><ul><li>CDOs are an unregulated type of asset-backed security and structured credit product. CDOs are constructed from a portfolio of fixed-income assets. </li></ul>
  7. 7. <ul><li>Inability of homeowners to make their mortgage payments. </li></ul><ul><li>Poor judgment by the borrowers &/or lenders. </li></ul><ul><li>Speculation & Overbuilding during the boom period. </li></ul><ul><li>Lack of Government Regulation </li></ul><ul><li>Risky Mortgage Products </li></ul>
  8. 8. <ul><li>Once investments in the US turned bad, more money had to be invested in the US, to maintain that fixed proportion. </li></ul><ul><li>In order to invest more money in the US, money had to come in from somewhere. To make up their losses in the sub-prime market in the United States, they went out to sell their investments in emerging markets where their investments have been doing well. </li></ul>
  9. 9. <ul><li>Global Markets Down </li></ul>
  10. 10. <ul><li>Excessive Leverage Is Always Bad in Long Term. </li></ul><ul><li>Stay Away From Loans And Credit Cards </li></ul><ul><li>Thank You </li></ul>

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