How did 2008 financial crisis happen ?

This is how the 2008 financial crisis happened. Investment banks were selling something known as mortgage-backed securities. These are basically a bunch of mortgages lumped together. However, investment banks were running out of good mortgages to put into these securities. So they decided to just loosen up their guidelines for what they qualify as a good mortgage so they could keep selling more and more and making more profit off these mortgage-backed securities. But these loans that they were selling that's good are terrible.

Why would someone want to invest in a Walmart cashier's $1,000,000 home loan? Surely they're not going to pay that. The big banks knew that, but they also knew that there was probably safety in numbers. The original mortgage-backed securities, the ones based on conforming loans or good loans that were actually good, are safe because if 20% of people default on their loans, investors in those securities still get a good return.

Not everyone will default the investment banks that were selling these securities thoughts, or at least publicly, said that if they Group A bunch of these terrible new loans together that there's still safety in the numbers. While one loan on its own might be at crazy high risk of default if you put 1000 terrible loans together, there's no way they're all going to defaults, right? Ultimately, while each of the loans might have been a pretty terrible investment on their own, the argument they were making is that if you put them all together, not everyone will default and you can in turn get some pretty high interest rates at the forefront in these banks were selling these securities like crazy.

Since the loans were risky, the banks could charge insanely high interest rates in the securities and make them incredibly attractive to investors. Lump all of these loans together into mortgage-backed securities with high returns and investors at the time were eating them up, but you're probably thinking if that was true and why would investors in mortgage-backed securities want to buy them if they knew the loans that they were made-up of were terrible? Couldn't they tell the investment banks were lying? Well, they could if they looked, but no one was looking because the agencies responsible for independently rating these securities on how good or bad they were.

We're rating them all as AAA, meaning the highest value and safest investment. Investors took the rating agencies word. Which were supposed to be independent companies and they bought up all of these mortgage-backed securities that were rated by them. The problem was the investment banks were in the pockets of the rating agencies. They needed the agencies to rate their mortgage-backed securities well so that they could sell their securities in their loans to investors and the agencies needed the banks to pay them so that they could make money. The banks refused to pay them if they didn't rate their securities AAA, knowing full well that the loans that they were actually rating were all. It's terrible. Long story short, investors like banks and hedge funds bought these MBS's thinking that they were a safe bet. Insane numbers of borrowers actually defaulted, as you'd expect a Walmart cashier to do on a $1,000,000 loan, and investments became worthless and the investors all lost their money. This collapse of the mortgage-backed security market had ripple effects through the entire U.S. economy with banks going bankrupt, the stock market collapsing into the USA neing thrown into a recession. All because a bunch of bankers got too greedy with the investment products they created and started selling lies. So that's in short how the crash of 2008 happened.

Comments

Why the US government 30$ trillion owe?

The United States is in a lot of debt. Currently the country owes $27.2 trillion. But who would even lend them that much money? Who does the US owe this massive sum? Well, the answer to that is pretty simple. In large part, it owes itself that money, but there's also quite a few other countries it owes to. the US essentially owes two groups of people, the general public, which can be other countries or even investors in the US and itself. But before we get into who makes up those groups and what the percentages look like, first let's get some basics. Whenever the US government needs money, it raises that money through the issuing of savings bonds or treasury bonds. These bonds are basically pieces of paper that say the US will pay the person or agency that buys it back with a little bit of interest. Many people want to buy bonds because they're pretty solid investments, like banks, foreign governments, and maybe even you. The debt ceiling, which you may have heard about,...

China really does not want war? Taiwan then whose? Why is Taiwan so important to America and China?

China is playing with peril. still, America will intermediate militarily to cover the island, If China invades Taiwan. This is what US President Joe Biden said during a meeting with the leaders of the Quintet in Tokyo on May 23. China is not sitting still. Beijing's Foreign Ministry prophet Wang Wenbin stressed that Taiwan is an integral part of mainland China. There is no room for concession or concession. Encouraging Taiwan's independence would be like playing with fire. This is what Chinese President Xi Jinping said in 2021. still, there would be nothing to worry about, If the issue was limited to such a war of words. The constitution also has a law on Taiwan called the Anti-Association Law, which states that if Taiwan does not unite with China, also China is naturally obliged to intermediate militarily in Taiwan. multitudinous international relations judges believe that if there is a war between China and the United States in the future, Taiwan will be the flash point of th...

The End of Doller empire !

The End of Doller empire! Saudi Arabia is in discussions with China to price some of its oil sales in yuan, but as ties with Washington continue to be strained. Beijing and Moscow are diversifying. China and Russia have taken another step closer towards dumping the dollar and agreed to trade in their respective national currencies, the Russian ruble and the Chinese yuan. The End of Doller empire Hi everybody. the US dollar has been the most powerful currency in the world for 80 long years. This reserve currency status gives the United States such unprecedented power over the world economy that can cripple the economy of any country within a fortnight. And because of this power, it has even dominated giant players like Russia and China. But you know what guys? This is where China and Russia have actually come up with a master plan to kill the dollar dominance in the world. And if you look at the past 10 years data, you will see that it's actually working out quite well. In 19...

Are we alone in the universe?

A dog! They are looking at the stars in the sky. As we see. May or may not be breathing. Creating or not creating. But one question is right between them. Just like us. Are we alone in the universe? When the Armstrongs returned from the moon, they were quarantined for several days. Why? Because if a virus or any other germs came through them from the moon, i.e. very close to our satellite, scientists thought about the possibility of life in this satellite, isn't it strange? Let's go to the universe in search of life. Earth is the only source of life? This question is very old. There are ten thousand times more stars in our Milky Way alone than there are sand dunes on this planet. To be more precise, this number is ten to the power twenty-two to ten to the power twenty-four or more. If five percent of its stars are like our sun, then the number stands at five hundred billion billion stars. Very good talk. If we assume that even one out of every five Sun-like stars has water and ...

What is the meaning of the rate race?

It's complicate to calculate exactly when you joined the rat race. But rest assured you're in this race. Flash back the time of reading in class eight? Ahead of the education test computation Algebra figures doctoring all the complex formulas of wisdom Get up beforehand in the morning at the private instructor's house and study late at night. You must have spent a lot of time busy with work compared to your age? We all spent. At that time, the guardian must have said that this is a many further days. Life is peaceful and peaceful only when the education test is over. You have heard these words numerous times in numerous occurrences of life. Take the SSC test, you get freedom when you get to council. Life will be full of joy once you can get into varsity. Enter the job life formerly. Having fun with your own plutocrat is different. Have you heard of this? Can you match the numbers standing at the end of the age clock? What do you think? Has life gotten a little easier after...

What is Obsessive Compulsive Disorder?

Depression has an additional air or disease in English which is called Obsessive Compulsive Disorder or OCD and in Bengali it is called Suchibai. Sounds like a very common disease doesn't it? We do not give importance to this disease because it is made fun of because it is considered normal. And on that occasion, this weed grows bigger. Pain increases and that pain is much more intense than depression. Obsessive compulsive disorder (OCD) is a common mental health condition where a person has obsessive thoughts and compulsive behaviors. OCD can affect men, women and children. Some people start having symptoms early, often around puberty, but it usually starts during early adulthood. Here is a detail view of OCD. According to the report of the World Health Organization, about 700,000 people commit suicide in the world every year. Ninety percent of these suicides are due to depression. People with Obsessive Compulsive Disorder or OCD may rarely reach the stage of suicide. But the life...

What is a meme stock? How does work a meme stock ?

With the growing interest in the stock market by new investors, the frenzy has created a new type of stock, the meme stock. What Is A Meme Stock? Meme stocks don't mean the internet's favourite meme from the weak is now trading on the stock market. Rather, stocks for companies themselves have gone viral online, causing investors to purchase them just for the meme. Meme stocks are getting more and more popular, and if you're an early adopter, you can stand to make some crazy returns, like with GameStop or AMC. But let's take a closer look to figure out what exactly a meme stock Meme stocks are a fairly new term, and they spawned out of trading hype and hysteria from 2020 and 2021, with discussions of the stock originating on Reddit or other online forums. Meme stocks garnered and do garner so much attention simply because of how fast they rise for seemingly no reason. Typically a good stock would rise 30 to 50% in a year, but a meme stock could make that move overnight. ...

Who controls of our whole economic money?

I'm gonna start this article with a quote. Henry Ford once said it is well enough that the people of the nation do not understand our banking and monetary system. For if they did, I believe there would be a revolution before tomorrow morning. I quote this because it encapsulates the fact that the contents of this article may be unsettling compared to the articles that I normally make. I still feel compelled to make this article because I've been exploring the financial world for the last four years and it's definitely given me a more complete view of the world I want to share some of what I've come across with you guys. I'm also going to do a article about cryptocurrencies like Bitcoin in the future and to understand why Bitcoin and other cryptocurrencies may continue to rise. It's critical that you understand the contents of this article. I hope that you find this topic interesting and that inspires you to do your own research afterwards. Now, with that sai...

Why money worth anything ?

Money is arguably one of the most important things in the world. While happiness and joy might outrank it at least on your uplifting Instagram feed, money does seem to make things easier. When you actually stop and think about paper money, though, we're left with a perplexing conundrum. There's nothing inherently valuable about these banknotes, at least today. So why does money have any value at all? Over time? How paper money is valued has actually changed, so to understand how modern money is worth anything. First, we have to look back to the early days of paper money. In the early days of governmental currency, money wasn't paper. Rather, it was usually a coin made of a precious metal like gold or silver. The value of that money was intrinsic as the value of the metal that made it up. If you melted a gold coin down, you'd have the same amount of gold as the coin was worth. As this system of money became impractical, governments decided to come up with a new way of ...

What is post traumatic disorder?

Catherine is a working girl in a city. The house is quite far from the workplace. He has to travel by public transport. One day it was quite late to leave the office due to work pressure. He boarded a bus to go home. And just before the last stop at his house. Quite a lot of the way. So he put it on the seat. The eyes may have come from fatigue. When he opened his eyes he saw that he was the only passenger in the bus and a boy was standing next to the driver. He asked the driver if the bus will not go forward? The driver said he would go. The young driver told her to sit quietly, but the young woman felt that something unusual was going to happen. Much like the sixth Indra someone told him something is very bad. So he wanted to get off the bus. Then the driver increased the speed of the bus. of the young woman. Nothing left to understand. Hell may descend inside the bus within a short time. Something will happen to him that even in his worst nightmares. The incidents of accidents ...

Tech Storror

Search This Blog