Very vivid explanation. First of all, economy is a whole concept. Formula: economy = finance+finance: sum of money and credit; Finance: the income and expenditure of the country. So the financial crisis is much smaller than the economic crisis. There is only one economic crisis in the world. Do you know which one? ) explanation: state revenue and expenditure: the state's tax revenue and expenditure includes welfare and public expenditure. (If there is a problem with the country's balance of payments, people's lives will mean bankruptcy) So economic crisis = financial crisis+financial crisis (Now many scholars think that financial crisis = economic crisis, but I object to this view, because they think that the current financial crisis will generally cause economic crisis. For example, the "Black Friday" incident did cause economic crises in many countries. But I stress again that the world economic crisis has only happened once. But the world financial crisis has happened more than once. Do you know how serious the financial crisis in America is? I copied it. It's wonderful. The most common official explanation for the financial crisis is subprime loans. However, the total amount of subprime loans is only a few hundred billion, and the US government's bailout funds have already reached more than one trillion. Why is the crisis still in sight? Some articles pointed out that the root of the crisis is that financial institutions adopt "leverage" transactions; Other experts pointed out that behind the financial crisis is 62 trillion credit default swaps (CDS). So, what is the relationship between subprime mortgage, leverage and CDS? What kind of interaction between them caused today's financial crisis? For simplicity, we used several hypothetical examples. If there is anything wrong, welcome criticism and discussion. 1. leverage: At present, many investment banks operate with 20-30 times leverage in order to make huge profits. Suppose Bank A has its own assets of 3 billion, and 30 times leverage is 90 billion. In other words, this bank A uses 3 billion assets as collateral and borrows 90 billion for investment. If the investment gains 5%, then A will gain 4.5 billion yuan, which is 1.50% relative to A's own assets. On the other hand, if the investment loses 5%, then Bank A loses all its assets and still owes 654.38+0.5 billion. 2.CDS contract: As leveraged operation is risky, according to normal regulations, banks will not take such risky operations. So someone came up with a way to take leveraged investment as "insurance". This kind of insurance is called CDS. For example, in order to avoid leverage risk, Bank A turned to Institution B.. Institution B may be another bank or insurance company, and so on. A said to B, What about the default insurance on the loan you gave me? I'll pay you 50 million insurance premium every year, 10 years, totaling 500 million. If my investment doesn't default, you will get the insurance premium for nothing. If you break the contract, you have to compensate me. A thinks that if I don't default, I can earn 4.5 billion, of which 500 million is used for insurance, and I can make a net profit of 4 billion. If there is a breach of contract, there is insurance compensation anyway. So for A, it is a business that only makes money without losing money. B is a shrewd man. He did not immediately agree to A's invitation, but went back and made a statistical analysis, and found that the situation of breach of contract was less than 1%. You can get a total of 50 billion insurance money by doing 100 businesses. If one of them defaults, the compensation will not exceed 5 billion. Even if the two companies default, they can earn 40 billion. Both A and B thought the deal was good for them, so they made a decision immediately, and everyone was very happy. Third, the CDS market: after B did this insurance business, C was jealous. C ran to tell B, how about you selling me this 100 CD? Each contract will give you 200 million yuan, a total of 20 billion. B thought it would take 10 years to get my 40 billion, but now I have 20 billion when I change hands, and there is no risk. Why not? So b and c will make a deal right away. In this way, CDS flows to the financial market like stocks, and can be traded and traded. In fact, after C got this batch of CDs, he didn't want to wait 10 for another 20 billion, but put it on the market and sold it at a price of 22 billion. D saw this product, calculated that 40 billion MINUS 22 billion, and there was still 654.38+08 billion to earn. This is a "primitive stock". It's not expensive. I'll buy it right away. As soon as it changed hands, C made 2 billion. Since then, these CDs have been copied repeatedly in the market, and now the total market value of CDs has been copied to 62 trillion US dollars. Fourth, subprime loans: A, B, C, D, E, F ... are all making big money, so where does the money come from? Fundamentally speaking, the money comes from the profits of investors like A and most of their profits come from subprime loans in the United States. People say that the subprime mortgage crisis is due to lending money to the poor. The author disagrees with this statement. The author believes that subprime loans are mainly for ordinary American real estate investors. These people's economic strength is only enough to buy their own houses, but seeing the rapid rise in housing prices, they started the idea of real estate speculation. They mortgaged their house and borrowed money to buy an investment house. The interest rate of this kind of loan should be above 8%-9%. It is difficult for them to handle it on their own income, but they can continue to mortgage their houses to the bank and borrow money to pay interest, empty-handed. At this time, A is very happy, and his investment is making money for him. B I am also very happy that the market default rate is very low and the insurance business can continue; The following c, d, e, f and so on all follow to make money. Fifth, the subprime mortgage crisis: when house prices rise to a certain extent, they will not rise, and no one will take over. At this time, the real estate speculators were as anxious as ants on hot bricks. If the house can't be sold, the high interest will be paid back. Finally, one day there was no way out, and the house was left to the bank. At this point, the breach of contract occurred. At this time, A is a little regretful. He can't make a lot of money, but he can't lose there. Anyway, B has insurance. B is not worried, anyway, the insurance has been sold to C, so where is this CDS insurance now? G has. G just bought 65,438+000 CDs from F for 30 billion. Before it changed hands, it suddenly received news that these CDS were downgraded, and 20 of them defaulted, which greatly exceeded the original estimated default rate of 1% to 2%. Every time you break the contract, you have to pay 5 billion insurance premiums, and the total expenditure reaches 654.38+000 billion. Together with the 30 billion CDS acquisition fee, G's loss totals130 billion. Although G is one of the top universities in the United States 10, it can't afford such a huge loss. So g is on the verge of bankruptcy. Financial crisis: If G goes bankrupt, the insurance that A spent 500 million dollars on will be ruined. To make matters worse, because A uses the leverage principle to invest, according to the previous analysis, it is not enough for A to pay off all its assets. Therefore, A is in danger of going bankrupt immediately. Besides A, A2, A3, ..., A20 are all going bankrupt. Therefore, G, A, A2, ... A20 came to the US Treasury Secretary together and lobbied with snot and tears. G must not go bankrupt. Once bankrupt, everyone is finished. When the Minister of Finance relented, he nationalized Company G.. Since then, the insurance premium of Company A, ... A20, totaled $654.38 billion, all of which were paid by American taxpayers. Seven, the dollar crisis: the above-mentioned 100 CDs have a market price of 30 billion. The total market value of CDS is 62 trillion. Assuming that 10% defaults, there will be 6 trillion CDS in default. This figure is 200 times that of 30 billion. If the US government buys CDS worth 30 billion, it will lose 654.38+000 billion. Then the US government will pay 20 trillion yuan for the remaining defaulted CDS. If you don't pay, you will see A20, A2 1, A22 and so on go bankrupt one after another. No matter what measures are taken, a sharp depreciation of the dollar is inevitable. Due to excessive credit expansion, for example, credit cards can be overdrawn in large amounts and there is no down payment for buying a house. This is well controlled in China, with a minimum of 20%. In this way, it will take at least 10 years to recover, such as the financial crisis in the United States and previous crises, at least 10 years. Moreover, it will endanger the real economy. The United States and Europe are China's first and second largest exporters, and they have no money to buy goods. China's exports, which account for 0/3 of GDP, will be greatly affected. A large number of coastal export enterprises will close down and a large number of workers will lose their jobs. The domestic economy will be greatly affected. In troubled times, only gold has been accompanied by inflation, and everything has depreciated, such as oil, non-ferrous metals, agriculture and rubber.