The United States "subprime" mortgage crisis is destroying the world economy

The United States "subprime" mortgage crisis is destroying the world economy

The United States "subprime" mortgage crisis is destroying the world economy

The United States "subprime" mortgage crisis is not only responsible for the economic turmoil in the USA, but it is also affecting the international market as well. In the mid 2000's there was a housing bubble and home sales peaked. To finance these houses people were using subprime mortgages, where they were combining a lot of debt into their house mortgage from other things, and then they were also using adjustable rate mortgages.

The loan incentives that where available for homebuyers increased, and it had become very easy for buyers to get approved for mortgages that they couldn't afford without regulation.
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Immediately after the housing bubble the interest rates on the adjustable rate mortgages began to rise, and the value of property was falling. The homeowners where then in high interest loans that they couldn't pay, and they owed more than the home that they had purchased was worth. As the number of delinquent mortgages and foreclosures began to increase rapidly, foreign investors began to shy away from U.S. properties and financial institutions. Worldwide investors stopped purchasing securities like the mortgage backed debts, and they became concerned about the American economy. This caused financial strife all around the world.

With the American economy going down countries all around the world began compressing their credit to avoid the same financial crisis, and production in Europe and the United States slowed down dramatically. With less production less money is being generated, jobs are being lost, and the problem only continues to grow. Large companies have been bailed out financially and markets have crashed, and there still may be worse up ahead for the USA. Not only are many countries in a financial crisis but it has become very difficult to get a loan of any kind in the United States, and the process is thorough and tedious.

Bad mortgage decisions that were allowed by United States financial institutions have created the financial problems that America and the world is facing today. The economy is still struggling while Americans continue to lose their homes, jobs, and markets continue to fall.

Countries that bought into the American securitized loans are also paying the price as they don't receive their trillions of dollars that are owed, and their people are now suffering financially. The American housing bubble has created turmoil for not only themselves but also the entire world, and the quicker a new budget and solution is found the better. Unfortunately, some financial institutions are profiting from this because of, among other things, lack of regulation.

This situation very well proves the Spanish proverb: " in troubled waters, fishermen gain"

Oscar E. Diaz.

About the Author: Oscar Diaz is a Venezuelan lawyer with 22+ years of experience in Corporate, International and Tax Law. He is licensed and admitted to practice law in Venezuela only. This article constitutes a personal opinion, and is not legal advice in any way. If you need legal advice, you should contact a lawyer licensed in your state and/or country. Oscar Diaz is not selling, promoting and/or marketing any legal service. This article is for informational purposes only.

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