The real reason for the spread of sub-prime loans

Wall Street in mid-table in 70 years has appeared like a comet MIRUKEN Michael is a genius who collected a large amount of junk bonds packaged product planning. "Junk" literally means the junk bonds, bankruptcy may be a piece of paper debt (bonds), and 100 percent in one year is said to yield even get anyone at that time, and did not even a glance. However, no matter how a single high-yield junk bonds even if the fear is that people do not buy anyone, but to collect a lot of risks outweigh the allure of interest if he had found it. This is the same as the logic of life insurance. In other words, to understand the whole calculation of the mortality statistics as long as the product, the total non-life insurance company is a loss.

The idea of Michael Milton along with the financial and technology advances various financial measures. The Bank of subprime borrowers to the batches of bonds to small-scale securitization, to be sold to investors. As a result, insolvent banks and the borrowers, but bad loans are now less so (risk investors bought the securities to take), comparatively low degree of security to the borrowers To become more and more loans. Moreover, the United States Securities and highest credit rating company is set up, buying more and more financial institutions around the world, the demand for self-bulge, and has been active in financing. And a lot of easy financing is done in the real estate market and a large amount of financial markets, so funds, real estate prices will rise significantly. This was the real reason for the spread of sub-prime loans.

Subprime lending is a problem and why there is a big problem?

As mentioned previously, the lower layer of sub-prime loans to credit the original rent, is that rising real estate prices in the impossible because people take out a mortgage or a loan for investment management Took more than a few people not to be. These people have real estate prices to rise together on the assumption that the loans, so even a slightly lower real estate prices, state debt default.

And if the United States, and the situation is worse in the presence of the NONRIKOSURON. NONRIKOSURON and real estate loan target only the ability to evaluate the profitability of the loan is to run it. In the case of Japan, speaking of real estate loans, if the case until the end of the individuals and companies have the responsibility to redeem the ordinary. However, if NONRIKOSURON, even if the debtor has defaulted, beyond companies and individuals responsible for the property and money so far paid, is not obligated to redeem. In other words, the rent can borrow easily on the other hand, you begin to fall in the price of real estate and is prone to dump.

Naturally, there are debt default and the house was seized and auctioned real estate prices. In fact, the current stop real estate prices down. In 20 cities nationwide that the United States in May of 1908 Standard & Poor's (S & P) / Case Schiller house price index decreased 15.8 percent compared with the same month last year. The decline in April was 15.2 percent, the situation is worsening and will continue to be. In this way, the process of falling real estate prices, the buy side is expected to drop to more pullbacks happen because home sales are increasingly worse.

Subprime lending problem is not just a problem for the United States

This comes as the U.S. economy as a whole will have serious consequences. First of all, have been in real estate loans to financial institutions that lent money would not come back bad happens. Moreover, it forms a principal in a variety of financial derivatives has made it the world's financial institutions are bought from the damage is severe.

Of course, the decline of real estate sales, real estate prices to fall a big blow for the industry. In addition, the prime layer can afford to have been affected are bound to come. So far in the background of real estate and consumer prices has been, but it reversed consumption招KE price will be reduced, the value goes down sharply, while mortgage payment this sense of Do not think people will increase.

In this way, the composition of the sub-prime loans during Japan's bubble economy a nonbank bank offices and rent roll of money anyway, bad behavior is the same.

Even if the U.S. economy and stock market breaking, Breaking the world economy. For example, Japan's exports to the U.S. about 24 percent of total exports, 84 percent in Canada, Mexico and 86 percent, China has accounted for 40 percent of the unaffected by this lie, you say? In fact, the Internet bubble in early 01 United States entered a recession period, when the European slowdown in the United States of minutes to recover and was also observed, but it was not the case.

, The sub-prime loans problem in Japan's economic bubble burst in similar circumstances, and this time of Japan's GDP has tripled the size of a possible collapse in the U.S., along with the development of financial engineering involved in financial institutions around the world Given that the scale of the collapse of Japan's bubble may be times, a very big problem for the global economy is to be believed.