Human life is difficult without money. We all know when a financial crisis hits our family, we all get panicked and anxious. Thinking, how to repay it back with interest to banks. The pain of hunger and father’s responsibility to handle the pressure, with rolling tears from eyes with uncertainty and lost hope of the future.
Imagine if the same financial crisis hit the world due to a few greedy individuals and self-interests. The world has started crumbling and the stock markets collapsing, lack of food, no jobs or employment for people, 1000s of companies losing their money. Such situations occurred a few years back, in 1999, the Dot Com bubble crash hit the market, which eventually led to the Great recession in 2008.
Basically, the United Nation's federal bank has introduced new economic policies. As the real estate market was booming effectively, the banks decided to reduce interest rates from 6.5% to just 1.75%. This led to massive greed across the US. People started taking loans with less interest and the banks did not ask for proof of repayment or security. Instead, they gave loans on mortgages (property deposit documents ) in case if they failed to repay, banks could resell them.
As time passed ahead, more people started taking loans, but funds kept decreasing in banks. The banks kept neglecting, and eventually they collaborated with insurance companies for loans. Banks initiated CDO collateralized debt obligations with insurance companies. Even though insurance companies had no money due to greed, they started providing more loans to banks. We all know everything has a limit, the banks have crossed it completely.
The loans have been given, when it came to repayment, people paid them as interest was less. Banks realized suddenly that these interests can never be covered up, so the federal bank increased interest rates from 1.75% to 5.2%. This policy made people stop repaying interests, the banks have started recovering homes, protests began, and cash flow disrupted everything.
The news kept pumping out in the media, and financial crisis news was trending. Which led investors to withdraw money from share markets slowly. After the news, stock market prices fell 5% and, after 6 months, they fell 43%. This made the entire US stock markets collapse, making everything unpredictable. Another piece of news came out when Lehman Brothers, which was one of the biggest insurance companies, announced bankruptcy of a $3.9 billion loss. This began the Great recession in 2008, where the world suffered major economic and financial crises.
