- There are millions of economists working on financial crisis all over the world. They are trying to figure out the solution of it. The causes of this global problem are complex, each part of people have different thoughts. Before introducing this hot topic, I would like to ask a question” What is economics?” Basically, it is “”to use limited resources to fulfill the unlimited wants” Somehow we always lose control of ourselves when we are facing the lures. Because of the unlimited demand in our head, in another word-GREED
- Subprime mortgage means mortgage lenders lend money to people whose credit history is not sufficient to get a conventional mortgage. Often these borrowers have impaired or even no credit history. (http://useconomy.about.com/od/glossary/g/subprime_mortg.htm) Why are lenders glad to lend the money to these poor, discredit persons? Because lenders are able to adjust a higher interest rate and earn lots of profit on subprime loans, such as banks or the other financial organizations. Compared with good credit persons, discredit people have to pay more money on the higher rate. Although banks will take risk to lend money to discredit people, banks are able to sell their wealth by auction if they do not have enough money to pay the credits. In reality, the welfares are houses.
- In the beginning of the 2001, the Federal Fund Rate decreased rapidly. People lent money easier than before, due to the lower interest rate. This change encouraged more and more people to decide to buy extra houses by credit now and sell them at future to make profits. As the demand increased, the price of houses moved up too. People began to complain about the government and the house price. Some people were too “poor” to have an apartment, even used all of their wealth at that time. After that, government set the maximum house price in order to control the trend of rising house price meanwhile the Federal Fund Rate rebounded. This is the bad news for the people who decided to buy houses for making profits in the future. So they broke the contracts with the financial organizations, as the result many companies failed and went bankrupt.
- Subprime mortgage crisis is also affecting Chinese economics. Many experts say that “The house price in Shenzhen will decrease continually and generally.” (I was living there.)I have a different opinion from theirs. As I thought, the house price will becomes stable at an acceptable price. Because double the beauty, double the pay.
Monday, September 28, 2009
Introduction of the Subprime Mortgage crisis
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OMG,this eassy talk the actually facts about Subprime mortgage.I think it makes a clearly explaination of it.
ReplyDeleteThis eassy reads hardly.However,It let me know more what is subprime mortgage.
ReplyDeleteWhen I was in korea, I read one article talks about the Subprime mortgage. So I just know little bit about this,but not that much.
ReplyDeleteI remember,it was beginning of the 20th century.
Most important reason is to release the restrictions by gov't under president of Bill Cliton(I think It was Bill Cliton>_<). The price of house was bubbled and finally burst,and many of the large companies led to crisis of subprime mortagage.
I think if someone wants to live in U.S. for long time, then this essay will help you to know about subprime mortgage.
Thank you for knowledges, Leo!:-)
Everything happening has a small cause. Like the butterfly effect, how huge the result is you will never know.
ReplyDeleteSubprime Mortgage Crisis is very hate topic to talk about. As consecutive to this problem I’d like to talk about DUBI, this small state in the UAE. DUBI by following this system and Loading people a lot of money changed completely from small state to a very big economy center in the Middle East, but after subprime mortgage crisis a pity DUBI has a lot of trouble and stopped many projects. The global economy affects everything in the world.
ReplyDeleteLast year, I took a class about political economics in Japan, and I sutudied about Subprime Mortgage crisis.
ReplyDeleteJapanese economics are affected, too. Most Japanese companies decreased profit last year. Because of this problem, many employee were fired.
Why do you choose this topic?It really hard to read.Subprime Mortgage crisis is the biggest economical problem of the world noeadays,it made lot of large international companies close down,such as Lehman Brothers Holdings Inc(LBHI) and General Motro Corporation(GM).After read your essay,I know more about Subprime Mortgage crisis.
ReplyDeleteSubprime mortgage crisis has been talked around the people in China since several years ago. We knew that it was a passive effect for economy. People who had sly mind always used the subprime mortgage crisis to make more money as they wanted to. Without the regulation of the economic system, a society will be disorderly.
ReplyDeleteThis lets me call to remembrance the situation about the house price of China.Actually,I don't know much about economics,let alone subprime mortgage crisis.Your artical make me know something about it.Thank you.
ReplyDeleteI appreciate reading this introduction about Subprime mortgage crisis. There is one thing I learn from your article that lenders are able to adjust a higher interest rate and earn lots of profit on subprime loans due to lend money to those poor and discredit persons. In my view, subprime mortgage crisis happens everywhere while the economic keep existing.
ReplyDeleteI have heard of subprime mortgage ever before. It would be accounted as a important factor resulting in financial crisis. That is true ,mortgage lenders lend money to unqualified people to get conventioanal mortgage. So that would be main cause why those group of people can not pay for the credit and lend to financial crisis. I think It is a big problem for economist to figure out subprime mortgage crisis.
ReplyDeletea very profound essay!!you explore the cause of subprime mortgage. actually, i don't know what is the meaning of subprime mortgage before read your essay, but now, thank you for your information, i get something new.
ReplyDeleteGood explainssion! Your world are clear and straight; it makes me much easier to understand this issue. About the house price, there always are some indterminacy factors. In China, house price are always stay in high level, I belive the root reason is the price of the earth are too high. And then the buiding expenses and the cost of materials. House price is a symbol of a socialty economic.
ReplyDeleteIt is kind of head reading,however,thx for telling us about it. You must search a lot of information about it. I think we all should know a little about it at least,because it is related our real life~!
ReplyDelete1. There are millions of economists working on financial crisis all over the world. They are trying to figure out the solution of it. The causes of this global problem are complex, AND people IN DIFFERENT PARTS have different thoughts. Before introducing this hot topic, I would like to ask a question, ” What is economics?” Basically, it is “”to use limited resources to fulfill the unlimited wants.” Somehow we always lose control of ourselves when we are facing the lures B(SMALL)ecause of the unlimited demand in our head, in another word-GREED.
ReplyDelete2. Subprime mortgage means mortgage lenders lend money to people whose credit history is not sufficient to get a conventional mortgage. Often these borrowers have impaired or even no credit history. (http://useconomy.about.com/od/glossary/g/subprime_mortg.htm) Why are lenders glad to lend the money to these poor, discreditED PEOPLE? Because lenders are able to adjust a higher interest rate and earn lots of profit on subprime loans, such as banks AND * other financial organizations. Compared with good credit PEOPLE, discreditED people have to pay more money on the higher rate. Although banks will take risk to lend money to THESE discreditED people, banks are able to sell their wealth by auction if they do not have enough money to pay the credits. In reality, the welfares are houses.
3. In the beginning of the 2001, the Federal Fund Rate decreased rapidly. People BORROWED(?) money easier than before, due to the lower interest rate. This change encouraged more and more people to decide to buy extra houses by credit THEN and sell them IN THE future to make profits. As the demand increased, the price of houses moved up too. People began to complain about the government and the house price. Some people were too “poor” to have an apartment, AND even used all of their wealth at that time. After that, government set the maximum house price in order to control the trend of RAISING THE house price; meanwhile the Federal Fund Rate rebounded. This WAS the bad news for the people who decided to buy houses for making profits in the future. So they broke the contracts with the financial organizations. As the result many companies failed and went bankrupt.
4. Subprime mortgage crisis is also affecting Chinese economics. Many experts say that “The house price in Shenzhen will decrease continually and generally.” (I was living there.)I have a different opinion from theirs. As I thought, the house price will becomes stable at an acceptable price. Because double the beauty, double the pay.(I AM NOT SURE OF THE LAST SENTENCE.)
GM DECIDED TO SHUT DOWN ALL SATURN RETAILERS. POOR SATURN. AND MY CAR HAPPENS TO BE SATURN. I DON'T KNOW WHERE I SHOULD CALL WHEN MY CAR BREAKS DOWN AFTER ITS CLOSURE. THANKS FOR YOUR EASY EXPLANATION ABOUT SUB PRIME LOAN. STILL IT WAS DIFFICULT FOR ME!