Five minutes apt comprehend the present earth fina

the financial crisis the maximum mutual explanation is that the subprime problems official, however, but in total hundreds of billions of subprime, but the U.S. government bailout funds, had to trillion or more, alternatively do not penetrate why the crisis coming to an end? There is an story pointed out that the root of the crisis of financial traditions a Then, the sub-prime, leveraged, and what is the relationship among CDS? Between them by what kind of interaction of today's financial crisis? Analysis of the financial crisis in many articles, has not seen these problems is easy interpretation. This periodical tries to understand their own to cater an answer to these questions, for understandable reasons, we use several hypothetical examples. Are not applicable to argue the Department welcomes critique.
one. Lever. At present, many investment banks to earn profits, with 20-30 times leverage, assuming that A's own assets, a bank of 30 million,New Lacoste Trainers High Top, 30 times the leverage is 900 billion. In additional words, the bank A 30 billion of assets as collateral to borrow 900 billion of funds for investment, if investment earnings of 5%, then A to get 4.5 billion profit, compared to A's own assets, which is 150% of the profits. Conversely, if the investment losses of 5%, then the Bank lost A light all the assets of their own still owes 1.5 billion.

II. CDS contract. The leverage of high-risk,Womens Lacoste Arin Trainers, in accordance with the customary,Lacoste Strap Trainers, the Bank does not flee as such a menacing action. So someone came up with a direction to obtain leverage to do This warranty namely cried CDS. For sample, bank A in order to shirk the risk to detect the body lever B. Body B may be distinct bank, it could be insurance companies, and so above. A above B, said the loans do you help me how to default insurance, the bonus I pay you 5 million per year for 10 years, a absolute of 500 million, if my investment does not default, then this insurance you took the white If rift of compact, you must for my amends. A calculated, if you do not default, I can make 4.5 billion, which takes out 500 million accustomed for insurance, I can a web profit of 4.0 billion. If there namely breach of contract, to pay the insurance anyway. So this is one A in terms of earn, instead of losing affair. B is a sly male, not instantly accepted the invitation of A, yet go behind and do a statistical analysis of the location of non-compliance of less than 1%. If you do a hundred schools of business, you can get 50 billion total insurance bonus, if an of breach of contract, amends up to but 50 million, even now the two breach of contract, they can earn 40 billion. A, B both sides believe namely this bargain to their vantage, it now closed the transaction, satisfaction of always.

III. CDS mart. B, later doing this the insurance business, C in the next envious. C went to B side that you put 100 CDS sold to me how to give you 200 million for every contract, a total of 200 billion. B think my 40 billion to 10 years to get, there is now a 200 billion changed hands, and there is no risk, why not, so B and C immediately handle. As a outcome, CDS stream as the financial markets favor stocks on can be traded, and trading. C behind the fact to get these CDS, does not want to wait another 10 years to receive 200 billion, but put it up for sale, cost at 22 billion; D see the production, forget almost the 40 billion minus 22 billion,Lacoste R75 P2 Trainers, but also earn a 18 billion, which is A resale, C earned 20 billion. Since then, the CDS in the market repeatedly copied, and immediately CDS market has been copying the merit of 62 trillion dollars.

IV. Sub-prime. Above A, B, C, D, E, F. ... are production huge profits, then in the end from where the money came out of it? Basically, the money from A and with A similar to the investors profits. Most of their earnings from the U.S. sub-prime loans. People mention that the subprime crisis is due to lend money to the needy. I differ on this statement. In my opinion, primarily to the sub-prime U.S. real estate investment of ordinary folk. Economic strength of these people would have ample to buy their own apartment, but saw fast mushrooms in house prices, moving from the idea of ​​real estate speculation. They mortgaged their house, borrowed money to buy investment housing. Interest on these loans to 8% -9%, and by their own source of revenue to deal with, but they can proceed to mortgage the house to the bank, borrow money to pay interest, sleight of hand cheats. A quite merry at this time, his investment for his money; B is also very pleased that the market is very low default rates, the insurance business can proceed to do so; backward the C, D, E, F, etc., along with money.

5. Subprime mortgage crisis. Rose to a definite degree of price mushroom is not up, none answered the back panel. At this time, like real possession speculators were restless feline on peppery bricks. Sell ​​the house, to reserve paying lofty interest rates, and finally to the blind lane of the daytime, the house training and arrangement of the bank. At this time of default happened. A point was a track of regret, big profits are vain, but also less wastage there, anyway, there is B to do insurance. B do not worry about,Womens Lacoste Trainers, anyway, the insurance has been sold to C. So now the CDS Insurance in there, in the G hand. Just F G had spent 300 billion to buy the 100 CDS, have not had time to alteration hands, suddenly received the newspaper, these CDS were downgraded, including 20 default, greatly surpassing the elemental estimate of 1% to 2% default rates. Every breach of contract to pay 50 billion of insurance money, a total expenditure of 1,000 billion. CDS 300 billion and accretion costs, G's losses totaled 130 billion. Although G is the label of the nation's altitude 10 large institutions,Lacoste Arixia FD Trainers, can not resist such a huge loss. Therefore G brim of collapse.

VI. Financial emergency. If the closure of G, then A price of 500 million U.S. greenbacks to purchase insurance on the bubble of the soup, even aggravate, because A uses leverage investment, along to the antecedent analysis, A lose it all of the assets is insufficient debt. Therefore, the risk of A bankruptcy immediately. In appending to A, there is A2, A3 ,..., A20, all ought be prepared to near down. Therefore, G, A, A2 ,..., A20 came attach in front of the U.S. Treasury Secretary, a snout a tear lobby, G must not fail, it is a failure all over. Minister of Finance, a soft center, put the G to the nationalized, then A ,..., A20 of the insurance money totaling 100 billion U.S. dollars all along the American taxpayers.

VII. U.S. dollar crisis. CDS 100 said above the market price is 300 million. The GDP is 62 trillion CDS market, assuming that 10% of the breach of contract, breach of contract then there is 6 trillion CDS. This diagram is 300 million 200 times. If the U.S. government 300 billion of acquisition value after the amount of the 100 billion CDS. Then for the repose of those who default CDS, the U.S. government to bear the consequences of a 20 trillion. If you do not pay, we must see at A20, A21, A22, and so one after another collapse. No material what amounts the U.S. dollar devaluation was inevitable.

the assumptions used in the enumeration above and the digit of discrepancies with the substantial situation, but the U.S. can not underestimate the seriousness of the financial crisis.