Loans used to be very common in the United States, from houses to cars, from credit cards to phone bills, loans were everywhere.
Locals rarely bought houses one cash at a time, usually taking out long term loans. Yet we also know that unemployment and re-employment are common in the United States. How do these people, who don't have a steady income or even no income at all, buy a house? Because their credit ratings are not up to par, they are defined as subprime borrowers.
Starting about 10 years ago, when loan companies were advertising on TV, in newspapers, on the street, or stuffing your mailbox with enticing flyers:
'Do you want to live a middle-class life? Buy a house!
'Don't have enough savings? Take out a loan!
'No income? Get a loan from the Awkward Loan Company.
"Can't afford the first payment? We offer zero down payment!
"Worried about the interest rate? We offer a 3% interest rate for the first two years!
"Still can't afford to pay every month? It's okay, you only need to pay interest for the first 24 months, and you can pay the principal of the loan after two years! Think about it, in two years time you will have found a job or have been promoted to manager, and you will still be able to afford it!
'Worried that you won't be able to pay in two years? You're so careful. Look at how much the house has gone up from two years ago. If you sell it to someone else, you'll not only be able to live in it for two years, but you'll also be able to make a profit! Besides, you don't have to pay for it, I believe that you will be able to do it, do I dare to lend it, but you don't dare to borrow it?
In such a temptation, countless U.S. citizens did not hesitate to choose the loan to buy a house. (Are you worried about the debt they will incur two years from now? American citizens, who are always quite optimistic, will tell you that those who act in movies can become governors, and in two years' time maybe I can even run for the presidency.)
The Awkward Loan Company has achieved phenomenal results in just a few months, but with all the money lent out, can it be recovered? The company's chairman -- Mr. Awkward, that is also familiar with the U.S. economic history of the figure, it is impossible not to know that the real estate market is also risky, so it seems that this proceeds can not be swallowed alone, to find a partner to share the risk before.
So I found the leading financial sector in the United States - investment banks. These guys can be the name of the big brother (Merrill Lynch, Goldman Sachs, JPMorgan), what do they do every day? Is to eat and idle is also idle, so find a Nobel economist, find a Harvard professor, find a financial engineering staff, with the latest economic data model, some financial alchemy (copula almost at this time out of refining), get out a few analytical reports, thus evaluating whether a stock is worth buying, the stock market in a certain country has a bubble, this group of risk assessment market This group of big brothers who call the shots in the risk assessment market, do you think they see any risk in this?
Jokingly, the risk is with feet can see! But there is a profit ah, then why hesitate, take over! So economists, financial engineers, university professors to data models, stochastic simulation after the assessment, repackaging, they got a new product - CDO (Note: Collateralized Debt Obligation, Debt Collateralized Bonds), to put it bluntly is a bond, through the issuance and sale of this CDO bonds, so that the bond holders to share home loan risk.
Light this sale, the risk is too high or no one to buy ah, assuming that the original bond risk rating is 6, belonging to the medium high. So the investment bank divided it into senior and ordinary CDO two parts (trench), in the event of a debt crisis, senior CDO enjoys the right of priority payout. So the two parts of the risk level became 4 and 8, respectively, the total risk remains unchanged, but the former belongs to the low-risk bonds, with the investment bank three inches of bad "gold" tongue, in the high-level restaurants continue to run seminars to send beautifully produced powerpoints and excel spreadsheets, of course, sold a full house! But what about the remaining high-risk bonds with a risk rating of 8? What about hedge funds? The investment bank found a hedge fund, which is a role in the world's financial sector, buying short and selling long, calling the shots, and living the life of a knife licking blood, so this risk is simply a small thing!
So by virtue of the relationship, in the world to find the lowest interest rate banks to borrow money, and then buy this part of the ordinary CDO bonds, before 2006, the Bank of Japan lending rate of only 1.5%; ordinary CDO interest rates may reach 12%, so just rely on the spread hedge fund will be full of money.
This way, something wonderful happened, in late 2001, the United States real estate soared, just a few years more than doubled, God, so as the embarrassing loan company's ad at the beginning of the thing will not be able to afford to pay the mortgage, even if there is no money to pay the house can still be sold for a profit.
The result is that everyone is making money from the people who bought the houses, to the companies that made the loans, to the major investment banks, to the banks in general, and to the hedge funds, but the investment banks are not too happy about it! At first, it was felt that the ordinary CDO risk is too high, only to throw to the hedge fund, did not expect these guys more than their own earnings, the net value of the desperately rising, I should have known that they stayed to play, so the investment banks have also begun to buy hedge funds, intends to get a piece of the pie. It's like a house at home with a long time to put the meal, coincidentally saw the next door neighbor of the nasty little flower dog, was going to poison it a meal, did not expect the little flower dog ate not only nothing, but also more and more strong, a house this time can be stupid, is not the moldy meal better nutrition? The first time I saw this, I was so happy to see that I was able to get my hands on it!
This time the hedge fund is happy, they are what people, the hands of 1 dollar, you can find ways to borrow 10 dollars to play the bandits ah, and now with the sought-after CDO of course, to do a big job! So they again in the hands of the CDO bonds mortgaged to the bank, in exchange for 10 times the loan operation of other financial commodities, and then continue to chase the investment banks to buy ordinary CDOs.
Koko, we signed an agreement that these ordinary CDOs would be ours!
Investment banks are really upset, in addition to continuing to buy hedge funds and sell ordinary CDOs to hedge funds
In addition, they have come up with a new product called CDS (Note: Credit Default Swap) Well, Wall Street is the breeding ground for these genius products: the general investors do not feel that the original CDOs are high risk, then I will not be able to buy CDOs. CDO high risk, then I get a good insurance, each year from the CDO inside a part of the money as insurance premiums, for nothing to the insurance company, but in the future out of risk, we all bear together.
The insurance companies represented by AIG think that it's good that CDOs are so lucrative now that they don't have to pay out a penny to share the profits, so it's not like they're giving away money every year for nothing! The hedge funds thought, "That's not bad, we've been making money for a few years now, and the risk is getting higher and higher in the future, so just by sharing a portion of the profits, the insurance companies will have to bear half of the risk! So once again, everyone is happy, Win Win Situation! CDS also followed the red!
But the story doesn't end there:
Because the "smart" Wall Streeters came up with another innovative product based on CDS! Let's assume that CDS has already brought us $5 billion in gains, and now I'm launching a new fund that specializes in buying CDS. Obviously, this fund, which is built on a series of previous products, is very risky, but I'm putting the $5 billion that I've already earned as margin, so that if the fund loses money, I'll use the $5 billion to cover the losses. If the fund suffers a loss, it will first be advanced with this 5 billion yuan, and only after this 5 billion yuan is lost will the principal of your investment start to lose money, and before that you can redeem it early, the first collection scale of 50 billion yuan. Gosh, is there any fund that's better than this?
The $1 denomination of the fund, the loss of 10% will not lose their money, but earned but every penny is their own!
Rating Agencies saw the genius of this regulation and simply did not hesitate: give AAA rating!
The result was that the fund sold like crazy, and various retirement funds, education funds, financial products, and even banks in other countries bought into it. While the initial offering was the original $50 billion, it's impossible to estimate how many billions have been issued since then, but the $5 billion margin has remained the same.
If the existing size is $500 billion, then the margin can only guarantee that no money will be lost if the fund's net worth does not fall below 1% of the principal, which means that the chances of losing money are getting higher and higher.
When the time came to the end of 2006, the United States real estate scenery for five full years finally fell from the top of the heavy down, the food chain also finally began to break. Because of the decline in housing prices, the time limit for preferential lending rates arrived, first the general public can not repay the loan, and then the collapse of the Awkward Loan Company, the hedge fund substantial losses, and then even the AIG insurance company and the loan of the bank, Citibank, JPMorgan has released a huge loss report, while the major investment banks to invest in the hedge fund also have losses, and then the stock market plummeted, the public generally lose money, unable to repay the mortgage People continue to increase, and ultimately, the U.S. Subprime Crisis erupted close to becoming Prime Crisis.
Credit Crunch opened the gates of hell, and do not know how to close them ......
After looking at the above and then talking about China, China's main Foreign exchange reserves is the dollar has been 1.9 trillion, this financial crisis in the United States increased a lot of cash flow, more printed out a lot of money, so there is inflation in the short term, the dollar depreciation makes sense, of course, the loss of China, who asked you to reserve the dollar
After looking at foreign countries and then look at the domestic, the domestic property market bubble is also very large, the people are in the single paragraph to buy a house. The country is to relax the financial policy, to put it bluntly is to cut interest rates to stimulate the flow of money, anyway, put in the bank is no interest, is the owner of the said (1. Banks interest income decreased), and then the country also said to increase the flow of funds, to put it bluntly is also more money printing. Short-term increase in the amount of money, money printed more than worthless is the owner said (2. Rising prices, declining purchasing power), interest rate cuts can be a bit of a role, it is like rubbing powder on the sore, short-term seems to cover, in fact, the sore rot deeper, as for the challenges and opportunities did not see the Development and Reform Commission said that the price of food to be in line with international "convergence", like oil, international crude oil prices, the price of crude oil, the price of food, the price of food and the price of food. Like oil, international crude oil prices to 150 U.S. dollars on the NDRC "convergence", and now fell to 60 U.S. dollars to not see the convergence. International food prices have risen and the NDRC has "converged". Why do we only look at the so-called exchange rate without considering the actual purchasing power of the domestic currency and the wage level? So, prices are rising, people's purchasing power can not, the factory production of things can not be sold have to close down, and now there are ten million migrant workers unemployed wave is not surprising!
Living standards are on par with North Korea, the welfare benefits and medical care of the people are on par with Africa, and prices of goods and housing and oil prices are on par with Europe and the United States. This is China's international status to enhance the challenges and opportunities, the owner you understand it