Causes of the economic crisis
This is the answer to the post “ What is a crisis? This is ... ”, in which, in my opinion, the causes of the economic crisis are incorrectly described. In the comments to the post I got angry and called it nonsense. In order not to be an idiot critic, I wrote this post.
I also wrote this answer in order to prevent a wrong explanation of the crisis from reading the above-mentioned post in the head of a person who did not understand the current situation until the end.
In general, there are professionals whose explanation of the situation can be found in specialized economic journals or heard on the same Echo of Moscow radio. It is better to learn about the causes of the crisis from there, and not from the pages of Habr.
')
In the original post it was written that the Americans did not buy as much housing on credit as the developers built, so the banks did not receive their profit.
In fact, the Americans, on the contrary, very willingly bought property on credit. Banks have relaxed and issued unsecured loans - that is, such loans, which obviously can not be paid. Non-payment is a normal situation, each bank lays a certain percentage of non-payment on loans in its calculations. When non-payment - 2-3%, everything is fine - the bank receives its profit. But due to the fact that lately, banks and credit organizations did not begin to check their clients so strictly, the percentage of non-payments increased sharply - banks began to lose their profits.
How do banks make money? They take money from some people at one percent and give it to others at a higher one. It is profitable for the bank to issue as many loans as possible.
Suppose a bank has $ 10 million. He gives ten clients $ 1 million each, and then sits and waits for this money for 20-30 years (mortgage loans have a very long repayment period). Accordingly, the bank can earn only interest from these ten people, but he does not want to do that. What can he do? He can sell the debt of these people to investment banks or some other economic agents (for example, the Ministry of Finance of the Russian Federation). In order to “sell debt”, the bank issues so-called derivative mortgage securities. These are not standard stocks or bonds, but securities, the interest on which, relatively speaking, their holders receive from the population, which took the loan.
A bank collects hundreds or thousands of loans at once and issues derivative securities for such a set of loans. These papers were considered very reliable (that is, the risk when investing in these mortgage securities was considered low), and very many investment banks bought them.
The bank that issued the loan resells the debt of its clients to other banks, receives money from them, which it can again issue on credit ... and so on ad infinitum.
We return to the history of unsecured loans. First, mortgage loan organizations like Fannie Mae and Freddie Mac issued mortgage loans to people who could then pay them back. But such people ended - due to the thirst for profit, mortgage loans began to be issued to less reliable payers.
As a result, Fannie Mae and Freddie Mac, the two largest mortgage companies in America, went bankrupt due to the fact that the default rate was too high. They went bankrupt, therefore, derivative mortgage securities are impaired. And all the investment banks invested in them. Fannie Mae and Freddie Mac pulled the investment banks, which ran out of money.
Investment banks go bankrupt due to the bankruptcy of mortgage companies. And since they invest money in all other areas of the economy, money is not enough for everyone.
Hence the crisis.
In short: the cause of the crisis is that too many Americans could not repay their mortgage loans.
Our banks often take money abroad. Foreign banks now do not have enough money themselves, so when excited investors come to our banks, our banks cannot give them money - they have no place to take them (remember that banks earn loans, that is, do not keep money at home).
Since there is not enough money for everyone, money is becoming more expensive, that is, the lending rate rises. Business can not take loans for development, economic growth is slowing. All bad.
I also wrote this answer in order to prevent a wrong explanation of the crisis from reading the above-mentioned post in the head of a person who did not understand the current situation until the end.
In general, there are professionals whose explanation of the situation can be found in specialized economic journals or heard on the same Echo of Moscow radio. It is better to learn about the causes of the crisis from there, and not from the pages of Habr.
')
In the original post it was written that the Americans did not buy as much housing on credit as the developers built, so the banks did not receive their profit.
In fact, the Americans, on the contrary, very willingly bought property on credit. Banks have relaxed and issued unsecured loans - that is, such loans, which obviously can not be paid. Non-payment is a normal situation, each bank lays a certain percentage of non-payment on loans in its calculations. When non-payment - 2-3%, everything is fine - the bank receives its profit. But due to the fact that lately, banks and credit organizations did not begin to check their clients so strictly, the percentage of non-payments increased sharply - banks began to lose their profits.
How do banks make money? They take money from some people at one percent and give it to others at a higher one. It is profitable for the bank to issue as many loans as possible.
Suppose a bank has $ 10 million. He gives ten clients $ 1 million each, and then sits and waits for this money for 20-30 years (mortgage loans have a very long repayment period). Accordingly, the bank can earn only interest from these ten people, but he does not want to do that. What can he do? He can sell the debt of these people to investment banks or some other economic agents (for example, the Ministry of Finance of the Russian Federation). In order to “sell debt”, the bank issues so-called derivative mortgage securities. These are not standard stocks or bonds, but securities, the interest on which, relatively speaking, their holders receive from the population, which took the loan.
A bank collects hundreds or thousands of loans at once and issues derivative securities for such a set of loans. These papers were considered very reliable (that is, the risk when investing in these mortgage securities was considered low), and very many investment banks bought them.
The bank that issued the loan resells the debt of its clients to other banks, receives money from them, which it can again issue on credit ... and so on ad infinitum.
We return to the history of unsecured loans. First, mortgage loan organizations like Fannie Mae and Freddie Mac issued mortgage loans to people who could then pay them back. But such people ended - due to the thirst for profit, mortgage loans began to be issued to less reliable payers.
As a result, Fannie Mae and Freddie Mac, the two largest mortgage companies in America, went bankrupt due to the fact that the default rate was too high. They went bankrupt, therefore, derivative mortgage securities are impaired. And all the investment banks invested in them. Fannie Mae and Freddie Mac pulled the investment banks, which ran out of money.
Investment banks go bankrupt due to the bankruptcy of mortgage companies. And since they invest money in all other areas of the economy, money is not enough for everyone.
Hence the crisis.
In short: the cause of the crisis is that too many Americans could not repay their mortgage loans.
Our banks often take money abroad. Foreign banks now do not have enough money themselves, so when excited investors come to our banks, our banks cannot give them money - they have no place to take them (remember that banks earn loans, that is, do not keep money at home).
Since there is not enough money for everyone, money is becoming more expensive, that is, the lending rate rises. Business can not take loans for development, economic growth is slowing. All bad.
Source: https://habr.com/ru/post/41964/
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