The Problem Of The Subprime Crisis - 855 Words

Currently, we are recovering from one of the worst recessions the United States and the world economies have ever seen. Known as The Great Recession, the period of falling employment, spending, saving and rising interest rates, officially lasted from December 2007 - June of 2009. However, the effects were felt severely numerous years after, and are still being resolved and learned from today. Normally, the housing sector of the United States market leads the economy out of a recession, being one of the few forms of spending almost exclusively domestic. Also, housing leads to a spur of other jobs including raw material distribution, construction, contracting, and real estate. The subprime mortgage crisis is argued to be the cause of the Great Recession and one of the main inhibitors of finding a solution quickly. What caused the subprime crisis, and why was it so detrimental even on a world scale? There are many hypotheses, some are proven through economic law and some are ideas based off of human nature. The Subprime Crisis is known as the fall of the housing market resulting in a record number of foreclosures and families declaring bankruptcy. This was a direct result of banks being able to produce money too quickly. Due to an influx of loans and high-interest rates, banks were able to create enough money for mortgage loans for people with weak credit, a subprime mortgage. If interest rates remained at the current price and the value of the housing market remained high,Show MoreRelatedFinancial Crisis And Its Effects On The World Economy1467 Words   |  6 Pagesfaced with a major financial meltdown with global market failures and economies in shambles. The emergence of subprime mortgages and the collapse of securitized derivatives led to much speculation of different causes. What was the root factor that led to the triggering of this financial crisis? 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