What started the financial crisis of 2008?
1 Answer
The Subprime Crisis
Explanation:
The excess in liquidity comes from a financial crisis in South East Asia. In the years 2000 banks benefitted the end of the possibility of not separating commercial banks and investment banks, the 1933 Glass-Steagall had been repealed by president Clinton.
They extended the credit to unsolvent clients(from minorities for instance) as the estate market was booming. People who were called the NINJA( No income, No job, no asset) were able to borrow money since the house they bought was then sold by the bank for a much higher price.
Unfortunately the estate market ceased to boom, and inflation made it worse to pay back their mortgages. Moreover the amount of money they had to pay skyrocketted because they wee variable based on the stock market. A crash in the stock market made loans soar, and this is what caused the crisis. People were evicted and banks eventually collapsed.
