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    Nobody has ever explained this.
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    Explained it to you or in general?
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    (Original post by dean01234)
    Explained it to you or in general?
    to me, and in general according to my experiences and searches
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    (Original post by The_Last_Melon)
    to me, and in general according to my experiences and searchings
    There actually is lots of information available. I should remember a lot more than I do, I did an essay on it last year. But the general gist was excessive lending to sub prime markets made possible in part by collaterised debt obligations (if you're interested in reading more, this is the place to start), which became an issue when the US housing market dropped and popped the metaphorical bubble.
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    I would like to know too.

    I thought all of this is zero sun games.
    So if the banks lose X, somebody else wins X
    Where did the money go?
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    (Original post by dean01234)
    There actually is lots of information available. I should remember a lot more than I do, I did an essay on it last year. But the general gist was excessive lending to sub prime markets made possible in part by collaterised debt obligations (if you're interested in reading more, this is the place to start), which became an issue when the US housing market dropped and popped the metaphorical bubble.
    this is the problem, lol, information saturation. impossible to find anything reliable nowadays.
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    (Original post by ODES_PDES)
    I would like to know too.

    I thought all of this is zero sun games.
    So if the banks lose X, somebody else wins X
    Where did the money go?
    this actually helps quite a lot, thanks, lol
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    (Original post by The_Last_Melon)
    this is the problem, lol, information saturation. impossible to find anything reliable nowadays.
    Get on google scholar, there are plenty of academics who have written about the crisis.
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    (Original post by ODES_PDES)
    I would like to know too.

    I thought all of this is zero sun games.
    So if the banks lose X, somebody else wins X
    Where did the money go?
    (Original post by The_Last_Melon)
    this actually helps quite a lot, thanks, lol
    Its not always the case, look at the internet stock bubble. If things get over inflated, they can and do pop.
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    Poor investment decisions where there was high risk on the money. They literally were handing out mortgages to victims of the chicago flood knowing well they couldnt pay it back lmaoo
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    (Original post by dean01234)
    Get on google scholar, there are plenty of academics who have written about the crisis.
    I can't understand a word academics say.

    I will make up my own theory. Government earns more than banks with war, so they buy the banks so they can monitor their population's spending and stop terrorists and things.

    I also have an idea that Universities are planning to buy the government, but that won't happen in a while.
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    (Original post by ODES_PDES)
    I thought all of this is zero sun games.
    So if the banks lose X, somebody else wins X
    Where did the money go?
    This is not exactly how it happened. There wasn't a transfer of money; instead, the value of certain assets was 'wiped' off as the initial valuation of said assets was not correct. All parties at a part to play in this:

    a) Interest rates were very low: Alan Greenspan has been criticised for not appreciating the domino effect this would have on the housing and credit markets;
    b) Deregulation: In the 1980s, deregulation of the financial sector led to certain initiatives that made access to credit and 'securitization' far too easy (risk taking reached new highs);
    c) Credit checks were rare: In certain cities and states (e.g. Michigan), credit checks almost never happened. People who would have historically not been eligible for a loan, were getting them without any income or background assessments;
    d) Banks: Using complex mathematical forumulae, 'quants' would 'bundle' up a number of mortgages and trade them. This created a market for them, increasing demand and supply;
    e) Rating agencies: Standard & Poor's, for example, would often rate these securities as 'AAA';

    There are more reasons, but these are the ones I can think of.
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    https://www.youtube.com/watch?v=qOP2V_np2c0
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    Thank you for this.
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    ..
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    (Original post by The_Last_Melon)
    Nobody has ever explained this.
    Hydraulic Keynesianism (the notion that infinite growth of the credit supply would lead to infinite economic growth) led to governments encouraging banks to lend to just about everybody, consumers aspired to own their own homes and were illiterate enough to believe that property prices could never go down and as such there was a steady stream of demand for credit. Anyhow, the banks lent to poor people (sub-prime lending) before packaging a bunch of sub-prime mortgages with good mortgages and then selling them (these are derivatives known as collaterised debt obligations). Once this happens an insurance firm like AIG will then insure the product against any losses so that (pre-2008) the bank basically could not lose money from buying these derivatives.

    So essentially what happens from about 2002 onward is that the default rate starts to increase (the historical default rate for a mortgage is about 6% - one of the reasons the current rates are stupidly low since interest rates should reflect the risk premium) and eventually around 2006 it gets sufficiently high that banks start to feel ill due to the sub prime losses (BNP Paribas reported a loss in March 06 largely due to the amount of derivatives it held), over the next year or so we then see banks start to **** themselves and come to the conclusion that their competitors are holding crap and so they stop buying derivatives from each other, the inter-bank lending rate shoots up and without cheap credit the banks stop lending to consumers at such a rate. Since house prices essentially have two prices (the price it would be based on supply and demand and the price it is based on the supply of credit) we start to see house prices fall in early 2007.

    This all culminates in August and September 07 when Bear Sterns and Northern Rock are unable to access capital and the BOE steps in here (in the US, Bear Sterns got bought) and at that point both the US and UK central banks basically realise that recession is coming and start to slash rates aggressively. We know the rest from the news.

    To cut a long story short.. governments and economists encourage lending.. consumers want homes and credit cards.. banks sell mortgages to other banks.. insurers insure the mortgages against potential loss.. consumers default.. banks stop lending as debt goes bad.. insured bad debt crushes AIG.

    ...

    OP, you should watch a film called 'The Big Short'.. a very good account.
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    (Original post by The_Last_Melon)
    Nobody has ever explained this.
    I am always really curious by questions like this. It is as if knowledge of search engines like Google and how to use them for even basic requests is completely missing. I searched "2008 financial crisis". Actually, I typed "2008" and Google suggested that search for me. It was that easy. And number one in the list was this link to the pretty well informed and impartial site Wikipedia.

    https://en.wikipedia.org/wiki/Financ...007%E2%80%9308
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    (Original post by ByEeek)
    I am always really curious by questions like this. It is as if knowledge of search engines like Google and how to use them for even basic requests is completely missing. I searched "2008 financial crisis". Actually, I typed "2008" and Google suggested that search for me. It was that easy. And number one in the list was this link to the pretty well informed and impartial site Wikipedia.

    https://en.wikipedia.org/wiki/Financ...007%E2%80%9308
    Looking for a sentence mate not an essay written by 2,000 people with different opinions and bad grammar.
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    In a nutshell, greedy lenders lent money to people who could not pay it back to buy properties that inflated in value because it was easy to borrow the money to buy them.

    Just like the Tulip boom, it went tits up when someone decided not to buy any more and the prices crashed.
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    (Original post by Rakas21)
    To cut a long story short.. governments and economists encourage lending.. consumers want homes and credit cards.. banks sell mortgages to other banks.. insurers insure the mortgages against potential loss.. consumers default.. banks stop lending as debt goes bad.. insured bad debt crushes AIG.

    ...

    OP, you should watch a film called 'The Big Short'.. a very good account.
    Its a shame OP was trolling rather than actually interested, this was a really good post.
 
 
 
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