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Why the Global Economic Crisis 
Occurred in 2008? 
By, 
Jyoti Ranjan Sahoo 
UM14203
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.
Lucrative Real estate. 
The real estate began to attract investors and investment bankers.
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?”
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.
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.
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.
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??
No buyers…..huge debt 
• The investment banker is not able to attract any investors. 
• Huge debt gets piled up. 
Lehman Brothers declares bankruptcy!
Thank You 
• References: Youtube, Wikipedia

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Global economic crisis

  • 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