Global Financial Crisis

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The Global Financial Crisis that occurred in 2008 and crippled every major economy was not an accident; it was caused by an unregulated and uncontrolled financial industry.

Decline of Real Estate Value

The financial crisis is considered to have its roots in the United States where there was an increase in loan losses for subprimes. Banks were lending money to people that did not have the capability to maintain a regular repayment schedule. Homeowners only had the ability to pay the interest on their mortgage and never pay the actual principle amount. When the interest rate began to increase, homeowners could no longer afford the interest payments required. Housing prices began to fall and debtors found that they could no longer afford to sell their homes to repay the bank for the mortgage.

With houses at lower value/prices, a person’s mortgage would not be as valuable for collateral as before. Nonetheless, the whole financial world plummeted in late 2008 due to decades of manipulation and deregulation that had resulted in the foundation of the worst financial disaster since 1930’s.

The Great Depression

After the Great Depression on the 29th of October 1929, also known as Black Tuesday, the United States had 40 years of economical growth without experiencing any kind of financial crisis. The stability of the economy was due to a combination of partial deposit insurance, together with a tight regulation of the banks behavior. Most regular banks at that time were local businesses and they were prohibited from speculating with depositors’ savings.

Investment banks, which handle all stocks and bonds trading, were small partnerships and did not in any case have the same influence or impact on the economy as banks today...

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...ference is that the report provides legitimacy.

Works Cited$file/Putting_mort_back_into_mortgages.pdf
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