In August 2008, the share prices of Fannie Mae and Freddie Mac, the two mortgage giants in the United States, plummeted, and financial institutions holding Fannie Mae and Freddie Mac bonds suffered huge losses. A series of sudden "changes" such as Lehman Brothers' application for bankruptcy protection, Merrill Lynch's "commitment" to Bank of America and AIG's emergency shocked all countries in the world. Wall Street's "abuse" of financial derivatives and underestimation of the subprime mortgage crisis eventually brought bitter results.
: The global impact of the financial crisis
The subprime mortgage crisis in the United States is a storm triggered by the bankruptcy of subprime institutions, the forced closure of investment funds and the violent shock of the stock market, which leads to the lack of liquidity in major financial markets around the world. The subprime mortgage crisis in the United States began to appear gradually in the spring of 2006, and swept through the major global financial markets such as the United States, the European Union and Japan in August 2007.
The American subprime mortgage market usually adopts a combination of fixed interest rate and floating interest rate, that is, buyers repay their loans at a fixed interest rate in the first few years after buying a house, and then at a floating interest rate. With the cooling of American housing market, especially the increase of short-term interest rate, the repayment rate of subprime mortgage has also risen sharply, and the repayment burden of buyers has greatly increased. This situation directly leads to a large number of borrowers with subprime mortgage loans can not repay on time, which in turn leads to "subprime mortgage crisis".
As the only superpower in the world, the outbreak of the subprime mortgage crisis in the United States instantly affected financial centers around the world and some neighboring countries, and its scope was far from just the subprime mortgage crisis, but spread to the entire financial industry. Although the current account deficit in the United States has been declining, it still accounts for about 6% of GDP. Americans are still one of the biggest sources of demand in the rest of the world because they consume far more products than they produce. Their demand has fallen sharply, which has greatly affected the economies of other regions and once caused panic in all countries of the world. (Information from Baidu Encyclopedia)
Baidu Encyclopedia Link: American Financial Crisis