Global+Financial+Crisis

Global Financial Cri - Global Economic Financial Crisis Introduction Definition financial crisis is applied broadly to a variety of situations in

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Global Economic & Financial Crisis
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2 Introduction Definition: financial crisis is applied broadly to a variety of situations in which some financial institutions or assets suddenly lose a large part of their value. Many financial crises were associated with banking panics or banks run Financial crises include stock market crashes and the bursting of financial bubbles and currency crises
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Introduction Three years ago, few people had heard of the term credit crunch, but the phrase has now entered dictionaries. Defined as “a severe shortage of money or credit”, the start of the phenomenon has been pinpointed as 9 August 2007. The roots of the credit crunch and the recent global financial crisis, however, started earlier.
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Introduction During late 90’s and early 2000’s, banks and financial Institutions started investing in high risk sectors such as sub prime mortgage. These loans and other loans, bonds or assets were bundled into portfolios – or Mortgage Backed Securities and sold on to investors globally.
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Introduction Between 2004 and 2006 US interest rates rose from 1% to 5.35%, triggering a slowdown in the US housing market. Falling house prices and rising interest rates led to high numbers of people who could not repay their mortgages. Investors suffered losses, making them reluctant to take on more CDOs ( Collateralized Debt Obligations) . Credit markets freeze as banks are reluctant to lend to each other, not knowing how many bad loans could be on their rivals' books.
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Global Impact The impact of the sub-prime mortgage crisis is quickly shown to have implications beyond the United States. Losses are felt by investment banks as far as Australia. Firms cancel sales of bonds worth billions of dollars, citing market conditions.
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Timeline Wednesday, February 7, 2007: HSBC announces losses linked to U.S. subprime mortgages. Tuesday, April 3, 2007:
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This note was uploaded on 06/07/2011 for the course ECON 13 taught by Professor Dougs during the Spring '98 term at Fullerton College.

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Global Financial Cri - Global Economic Financial Crisis Introduction Definition financial crisis is applied broadly to a variety of situations in

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