The Effect The Current Subprime Loan Crisis Has On Global Markets

"Why is it that the crisis in. Subprime believe like rippling effect on many economic sectors?

"Why are companies outside the United States affected by U.S. mortgage crisis?

During the seven days that I have numerous emails from my subscribers asking me this question, and I want to use. This opportunity to explain what this home mortgage loans sub prime, credit crisis - even if what you want to call it - and present
Situation is all about.

Between 2002 and 2004 in U.S. interest rates are low never before. At least as far as I remember. I'm not old yet! Impact the rate. Low-interest real estate boom in the U.S. capital is often called sub-prime loans. These are funds that end. Believe that the borrower does not qualify the best rates in the market as. From the credit history of their low

Subprime loans cover. Variety of credit instruments including loan Subprime loan Subprime cars and cards. Subprime credit, among others. The word sub-prime "means. Credit status of borrowers. (Is less than ideal), not the interest rate.

But banks do not worry too much. Go about it, because low interest rates and simultaneously in real estate prices. Property will continue to increase in 1990.

For 2002/2004 to anyone who can be counted to three loans. Many people in America can have. Buy expensive single family home and other property they did not before.

But in 2006, U.S. interest rates three times and now, especially sub-prime borrowers unable to pay. Next month period longer. Provide more money to the end. Believe sub-prime collapse started.

But that's not all. Some banks and other financial. institutionals. Subprime loans converted million in bonds. These are now available. For billions of dollars in bank, insurance companies and mutual funds that are not really to be a safe investment.
Because bonds are. That is why they hold. A safe harbor in the violence.

And not only the bonds sold in the U.S. institutionals but people overseas. All the short people all investors invest in European investment in America, Europe and America, etc, etc!

So you can Imagine what happens when the loan begins to dissolve and practice of conversion. Bonds backfired as it swept all over the U.S. border in other countries. German industrial bank IKB 13000000000 dollar invested in bonds and they are looking for a loss of $ 5,000,000,000.

This year the games sub. Prime rights and massive amounts of money invested in real estate in Florida, Delaware or Texas, the U.S. and international capital markets. Borrowers do not think many will. Fall at the same time.

By USFederal Reserve loans to 100 billion dollars to bounce. At the same time it seems. To decrease only in the ocean considering the impact it can have on international capital markets.

Bad debts are a risk. The largest single world economy. In the past, many based in America. Money they dare - heart, stimulating economic and cranking up their homes worth more. More and more bank loans and that threw its customers with low interest rates.

All this can backfire put pressure on the U.S. economy because money used to be selfish now, because currently organized to borrow up to ear Their financial problems can not pay anymore because there is anything left to pay in the end it takes a lot. Liquidity from the market.

Company and also unrelated to the current furore real estate from the Subprime Crisis. If they need capital. New bank will have to pay higher interest rates for the extra risk or get to what extremes it. Not received any loans, making it difficult for companies to grow, especially if companies want to merge with other costs are often billions of dollars. It all drops out now to reduce Revenue and profit outlooks.

And other equally bad effect on the entire company if any property attached or Hedge funds buy convertible debentures and mortgages million profit, often borrowing money to buy. They are sitting in Division Head losses and debt. In order to repay debt. Their shares and other commodities. And of course it push prices down. In addition, the share price. It's like baby chain reaction.

And the real reason the market.