Are the US mortgages the cause of the next economic crises?

liaoyu03 · Joined: 09 Sep 2007 Posts: 166 4.18 Dollars($)

Over the years the average american is financing his luxuries by making debts. Now we see a situation where companies might go bankrupt as mortgages are not being paid.

When those companies fall down, will this cause a major crises on the financial markets of the world? And will we have a bad economy like the 1930's?

sara

Hi Liaoyu,

It is true that the subprime mortgage market trundown has affected the entire industry. But I don't think the industry professionals will just sit back, neither have they done so. They have come up with stricter laws as far lending is concerned. And, this time, they've emphasied on the point that even rich people may not get loans. It will all depend on whether they can fulfill the criterai as set up by the lender.

Take Care

Guest

Hi Liaoyu,

At present, the U.S. financial market is facing a credit crisis and all the people are going through financial troubles. It is because of those low score borrowers who easily get qualified for a loan and ultimately defaults on the loan. Moreover with the fall of the home prices, homes are not easily selling in the market and thus home owners are unable to repay the loan from the proceeds of the sale. In this situation, the investors have purchasing bonds from the banks and the banks who have financed for the loans are asking for their money back from the lenders. Thus the lenders are also failing to repay it back to the banks.

As a result, many mortgage companies are now filing for bankruptcy. In this way, if mortgage companies fall down, it may cause a crisis in the financial market of the world.

Jessica · Posted: Sun Sep 09, 2007 11:45 pm Post subject: RE: US economy crisis

Hi Liaoyu,

Welcome to our community forums.

Well, it has already caused a crisis in financial markets and even affected the stock market. But I feel it isn't as big as the one in the 1930's Great Depression when the entire market, every bit of it had gone through a crisis. There was the stock market crash, thereby affecting international trade which faced a decline along with a decline in personal income, tax revenues earned by the government, prices etc.

On a global level, cities dependent on heavy industries were a part of the crisis. Even construction came to a stop in certain countries and then there was the collapse in farming and agriculture whereby crop prices fell to record levels..So that's a big crisis and I feel the subprime mortgage market is definitely not as big, yet it is large enough to make the industry take appropriate measures so that such a thing doesn't happen again. It will hopefully make the industry more disciplined in terms of lending –it's time for lawmakers just not to enforce but to check if at all such laws are worth implementing or should they replaced with better legal measures.

However, it's good to see that the government has finally taken a step forward to help people retain homeownership rights. That's worth appreciating. Smile

Regards,

Jessica

domainforsale · Joined: 10 Sep 2007 Posts: 7 0.00 Dollars($)

From everything I have being reading, it looks like it might cause a problem, but I am not sure to what extent.

Guest

Federal institutions are taking active steps to help the economy recover out of the situation it is in. I don't think this financial crisis will stay for too long. Things have started to stabilize now.

liaoyu03 · Joined: 09 Sep 2007 Posts: 166 4.18 Dollars($)

i also think this thing wil not happened. but something is truely appear some phenomenon like the US mortgage situation has already started to adversely affect the world economy. World wide funds that include US mortgages are dropping in value due to the mortgage crisis. Some stocks are also declining over fears of the US crisis. Investors world wide are taking a hit as a result. Governments and central banks in many countries have had to step in and bail out some companies, freeze funds, and inject money into the market to prevent further collapse. I think it's already hit - it's just a matter of how much worse it will get. thanks for your analyse.

Guest

Though the U.S. mortgage has created a crisis in the market, yet I feel that the situation will surely overcome. Before the scenario become much worse, the Government will surely take some active measures.

bwfgllc

As a student of the global economy I will tell you that the subprime situation is a blip on the radar screen of what is really going on in the global economy. Every 7 to 10 years in mortgage industry this process happens over and over again. I survived it the first time and will do so again. The big difference no then back then is our economies are connected more globally. So if USA sneezes other countries can catch a cold. There is a lot of cash not in the market because of the war, uncertanity, rising oil prices, rising commodity prices, consumption behavior, global labor, closing of industries, transfer to service economies for industrialized nations etc. I am saying all this to say that the mortgage industry is not going to cause the depression it is a whole lot of factors caused by government monetary and fisical policies, corporate raders and multinationals and battle for human and natural resources world wide that will cause a crash.

thanks,
Tim

Jessica · Posted: Thu Sep 20, 2007 5:28 am Post subject: RE:

Right you are Tim. It's because the economy of different countries are so connected that if one faces a downturn, the other gets affected too. And truly said, the mortgage industry isn't always suffering just because of it's own practices. There are external factors as well.

The overall economy is something that we shouldn't forget when we find out reasons behind any turmoil in the industry. But I feel the industry professionals have to take that extra step so that they can at least prevent the industry from being hit hard by the disturbances in economy.

Regards,

Jessica

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