The Financial Crisis Of The United States Essay

762 Words Oct 30th, 2015 4 Pages
A fundamental break down in the existing economical arrangement was fabricated in the financial global crisis that started in summer 2007 and surprised many nations. Commotions in the financial world (banks) had an impact on the real economy in terms of people’s livelihoods. This financial crisis is globally significant to us, as it took place in the heartland of capitalism, the U.S., which is the richest most successful dominant capitalist power.
The key trigger of the financial breakdown was, easy lending of the U.S. housing market, in an era of very low interest rates and reduced regulations. There was an astonishing housing boom across the U.S. and subprime lending, issuing loans to borrowers with low credit rating, became more frequent. ‘During 2004-2006, almost 80% of all subprime mortgages were securitised.’ This is a high risk that was taken by the financial sector with a great chance of borrowers creating a default of their mortgage repayment. Initially, borrowers were attracted by the low interest of the subprime loan, but subsequently suffered from slowly risen interest. At one point the U.S. saving rate dropped to zero as a result of an increase in house prices, which lead to a halt in people’s funds and many of them began borrowing to finance consumption, accumulating a huge number of debts. Furthermore this contributed to the collapse of many banks such as, the U.S. bank Lehman Brothers. Rising interest rates on loans burst the real estate housing bubble,…

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