Quote:
Originally Posted by kirakira
Subprime loans rings a bell. The US government actively encouraged high risk lending, i.e. leading $$$ to people to buy houses when they can barely afford to pay the repayment. When the interest rate go up, and housing prices stunted, a lot of these people were forced to default, and it pretty much went down hill from there. All of a sudden, the banks are finding that the houses they lend $300,000 have as collateral suddenly is only worth half as much even after they call the debt collector, and things just snow balled from there. This sort of stuff happens but not to this scale.
The other one is wild speculation of oil and other resources. $150 a barrel... geez.
Anyway do some research on the current financial crisis and everything will be clear.
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From what you described, it was a problem inside the country. I fail to see how the rest of the world grinded to a halt unless they were doing the same thing. How did government encourage it? The only encouraging I can see is by no regulation which then at that point, it just comes down to the greed of the individual companies which just to happen so be massive. That built upon poor spending habits built upon the thought of "I just need another credit card".
About the oil thing, one cannot ignore that China will put a hefty strain on resources in addition to the US. Speculation was a big issue I realize that but when the dust settles(it pretty much has at this point given that oil is like what, $40 a barrel I think) it will creep back up over a $100 simply because global demand will go up due to not just China and the US but India aswell(they will take longer obviously but their population is also over a billion like China).