American banks had excess funds and created foreign institutional investors to invest in emerging markets, fueling unnatural growth. Decades of outsourcing devastated US manufacturing and made it impossible for US companies to compete with low-cost countries. The bursting of the US housing bubble was caused by high default rates on subprime mortgages. Financial companies lent money to subprime borrowers and packaged mortgages into securities like mortgage-backed securities and collateralized debt obligations. When homeowners defaulted, investments in the US soured, forcing the sale of emerging market investments and causing global markets to decline. Excessive leverage through loans and credit is always risky long-term.

1. By Sameer

2. ONE Q: HOW IT STARTED ? 1 American Banks Have Excess Pool Of Funds They Formed Institutions Named Foreign Institutional Investor Entered The Emerging Markets With Lots Of Money Resulted In Unnatural Growth Of Stock Markets Globally

3. Decades Of Outsourcing Have Devastated The American Manufacturing Base. 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.

4. ONE Q: HOW IT STARTED ? 3 Bursting Of The United States Housing Bubble Reason: High Default Rates Subprime Losses

5. HERE COMES FINANCIAL COMPANIES LENDING MONEY TO THESE PEOPLE

6. Mortgage Backed Securities (MBS) MBS is an asset-backed security whose cash flows are backed by the principal and interest payments of a set of mortgage loans. Collateralized Debt Obligations (CDO) CDOs are an unregulated type of asset-backed security and structured credit product. CDOs are constructed from a portfolio of fixed-income assets.

7. Inability of homeowners to make their mortgage payments. Poor judgment by the borrowers &/or lenders. Speculation & Overbuilding during the boom period. Lack of Government Regulation Risky Mortgage Products

8. Once investments in the US turned bad, more money had to be invested in the US, to maintain that fixed proportion. 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.

9. Global Markets Down

10. Excessive Leverage Is Always Bad in Long Term. Stay Away From Loans And Credit Cards Thank You