There is a good word in Huaxia called "clothing, food, housing and transportation".In just four words, the four most basic needs of ordinary people in their daily lives are vividly explained.In fact, this word is not only applicable to China, but also to the whole world.Don't look at foreigners with yellow hair, white skin and blue eyes, but they still need "food, clothing, housing and transportation" in their daily life!
For a natural person, clothing, food and transportation are all easy to say, but only this "residence" is definitely a relatively large burden, especially for a family, if there is no fixed place to live, can that home still be called home?
Therefore, since ancient times, not only Chinese people, but even foreigners have attached great importance to living.This tradition continues to this day and is still relevant.Don't think that this world is just that Chinese people like to buy houses and land, and the same is true for foreigners.Don't you see those rich foreigners, one by one, they are not villas, manors or even castles?
Even if you don't have money, you have to buy an apartment to live in.Therefore, in foreign countries, since the Industrial Revolution, especially since the beginning of the 20th century, this real estate business has become a very important business.In the process of development of any developed country in the world, the real estate business has become an important part of its economic composition, and no one can ignore it.Even in modern times, the world's real estate business is still a very important part of the economic composition of countries, and no government can ignore the real estate business.In the case of the United States, the world's largest country, the real estate business is also very important.The real estate business in the United States is very developed and occupies an important position in the national economy.Of course, because the United States is the fourth largest country in the world, with a land area similar to that of China, but its population is several times less than that of China, and even a fraction of the population of China, the real estate economy is not as important as the current China in the economic composition of the United States.But even so, once there is a crisis in the real estate economy in the United States, it will inevitably cause turmoil at the fundamental level of the economy.As the world's largest economy, once the economic fundamentals of the United States are turbulent, it will inevitably trigger an economic crisis of one kind or another, which will affect the whole world.In fact, since the sixties of the last century, the real estate economy in the United States has experienced four "crises", and each time the real estate economy has a crisis, the entire United States and even the world's economy will be in turmoil.According to official data from the United States, in the 47 years from 1963 to 2011, real transaction prices in the United States increased nearly 14 times, and in 1963 compared with the peak in 2007, it increased by 167 times.Over the past 47 years, U.S. home prices have risen by an average of 59 per year, and in general, U.S. home prices have fluctuated slightly, while the general trend has been steady.In the past 47 years, the U.S. real estate economy has experienced four relatively large fluctuations, the first of which occurred in 1969.In that year, the "first housing crisis" began when the fifth economic crisis since World War II broke out in the United States due to the Vietnam War, the sharp increase in oil prices in Arab countries, and the embargo on oil.The housing crisis lasted about three years, with house prices bottoming out in 1972 and quickly returning to pre-crisis levels and beginning the first few years of sharp increases.The second housing crisis in the United States erupted in 1981.In this year, the instability in the Middle East and the sharp rise in oil prices led to a serious stagnation in the U.S. economy and a sharp increase in unemployment.In this case, the mortgage rate quickly rose to 18, and the primary loan rate was as high as 22.People have a negative attitude towards the market, believing that it has been difficult for house prices to recover in the past decade, and as a result, the number of property transactions has shrunk significantly.But in fact, the housing crisis lasted only two years, and then U.S. home prices returned to an upward trajectory.As for the third real estate crisis that broke out in the United States, it was in 1991, but compared with the previous two real estate crises that affected the whole country, this time the crisis did not affect a large area, and only broke out in a limited number of states such as California.The third housing crisis lasted for about two years, and then from 1993, the real estate economy in the United States entered a fourteen-year boom until the arrival of the fourth housing crisis.Compared with the previous three real estate crises, the real estate crisis that broke out in 2007 almost killed the United States, and not only caused the American economy to suffer a heavy blow, but also triggered an economic crisis around the world.And different from the previous three real estate crises caused by the economic crisis, the fourth real estate crisis caused by the global economic crisis is much more serious, not only the United States economy has suffered a heavy blow, Europe, Asia, Oceania many countries have also suffered the economy, the real estate crisis caused by the global financial crisis, the consequences of the 1987 US stock market crash, and even known as the most serious economic crisis after the US economic depression in the thirties of the last century!
And the root cause of this US real estate crisis is the greed of those investors!
In the late 70s and early 80s of the last century, a stagflation crisis broke out in the United States, which not only led to the second real estate crisis in the United States, but also affected the world's finances.Against this economic backdrop, a set of ideas centered on reviving traditional liberal ideals and reducing government intervention in the economy and society as the main economic policy goal began to spread in the United States.This set of ideas is known as "neoliberalism".The core content of neoliberal economic policies in the United States is to reduce government intervention in the financial, labor and other markets, crack down on labor unions, and promote economic policies that promote consumption and promote high growth with high consumption.Under this economic policy, the U.S. government began to encourage ordinary people to eat more than they could and spend frantically in order to promote rapid economic growth.At the same time, an important element of such an economic policy is deregulation, including financial regulation.As a result, since the Reagan administration came to power in the early 80s, the United States has been enacting and amending laws to relax restrictions on the financial industry and promote financial liberalization and so-called financial innovation.For example, in 1982, the U.S.
Congress passed the Gahn-Saint-Germain Thrift Act, which gave thrifts a similar scope of business to banks, but was not regulated by the Federal Reserve.Under the law, thrifts can buy commercial paper and corporate bonds, issue commercial mortgages and consumer loans, and even buy junk bonds.Subsequently, the U.S. government successively introduced more similar laws, with the aim of removing barriers between the banking industry and the investment industries such as securities and insurance, so as to open the door to so-called financial innovation and financial speculation in the financial market.Against the backdrop of these legal reforms, speculation on Wall Street in the United States has become increasingly intense.Especially since the 90s of the last century, with the Federal Reserve's interest rate continues to fall, the innovation of asset securitization and financial derivatives has been accelerating, coupled with the luxury consumption culture that pervades the whole society and the blind optimism about future prosperity, it has provided the possibility for ordinary people to borrow ahead of consumption.In this case, the real estate economy in the United States has begun to pick up, and the real estate market is getting hotter and hotter, even the bursting of the Internet bubble at the beginning of the new century and the 911 incident have not stopped the hot real estate market in the United States.As the saying goes, capital is like a shark, as long as there is a little bit of blood, then capital will chase after it at the first time.The boom in the U.S. real estate market has naturally triggered the pursuit of capital.However, before the new century, those unregulated capital were a little more honest, and after the new century, especially after 911, these capital from Wall Street began to become unscrupulous.Everyone knows that loans are a very common thing in the United States, and it is very common for the American people to consume in advance and eat their own food.And in the United States, except for those who are super-rich, the ordinary middle class and the vast majority of ordinary people rarely pay the full amount when buying a house, and they usually buy a property through a loan.But again, unemployment and re-employment in the United States are a common phenomenon.These people who have an unstable or even no income at all, and buy a house because their credit rating does not meet the standard, they are defined as subprime credit lenders, referred to as subprime lenders.Subprime mortgage lending is a high-risk, high-yield industry that refers to loans made by some lenders to borrowers with poor credit ratings and low incomes.The difference from the traditional standard mortgage is that the subprime mortgage does not require much of the borrower's credit history and repayment ability, and the loan interest rate is correspondingly much higher than that of a general mortgage.Those who have been denied a quality mortgage by a bank because of a bad credit history or weak repayment ability apply for a subprime mortgage to buy a home.The U.S. subprime mortgage market typically uses a combination of fixed and variable rate repayments, where homebuyers repay their loan at a fixed rate for the first few years after home purchase, and then repay the loan at a variable rate.In the five years leading up to 2006, the U.S. subprime mortgage market grew rapidly due to the continued boom in the U.S. housing market and the low level of U.S. interest rates in previous years.In such a situation, many financial derivatives related to subprime loans have appeared, among which the most famous financial derivatives are "Collateralized Debt Obligations" (CDOs) and "Credit Default Exchange" (CDS).In the real estate lending market, in order to share risks and benefits, loan companies find investment banks, and investment banks securitize them, resulting in "collateralized debt obligations" - CDOs.In order to make huge profits, many investment banks use 20-30 times leverage.For example, there is a Zhang San investment bank with its own assets of 3 billion US dollars, using 30 times the leverage operation, that is, with 3 billion US dollars of assets as collateral to borrow 90 billion US dollars of funds for investment, if the investment is profitable 5, then Zhang San Investment Bank will get a profit of 4.5 billion US dollars, relative to its own assets, this is a windfall profit of 150.However, the risk of leveraged operation is high, according to the normal operation method, Zhang San Investment Bank should not carry out such a risky operation, but it can not stand this operation can obtain high profits, so someone came up with a way to take leveraged investment to make insurance, this insurance is "credit default exchange" - CDS.The specific process of CDS is as follows: Zhang San Investment Bank finds Li Si, and Li Si may be another investment bank or insurance company.Zhang San insures the leveraged operation, paying Li Si an insurance premium of $50 million a year, for a total of $500 million for ten consecutive years.If the CDO does not default, in addition to the insurance premium of 500 million US dollars, Zhang San can also earn 4 billion US dollars, and if the CDO defaults, Li Si will pay anyway.That's the credit default exchange!
In fact, CDS is essentially a kind of insurance - Party A pays the premium, and if the underlying asset defaults, Party B compensates for the loss.However, if it is named "insurance", it will be subject to strict supervision of insurance products, so the name "financial innovation" is "interchangeable".The original intention of CDS was to share the risk – the default risk was originally borne only by the loan issuer, but now through the creation of financial products, various investors can share the risk while reaping the benefits.The motive for profit soon gave birth to the art of speculation, and in order to cater to demand, Wall Street developed a series of financial derivatives such as CDX and CDXIG, and the insurance subject became a basket of CDS and indexes.Since housing prices have been rising, the risk has not evolved into losses, the premiums are getting lower and lower, and the scale is getting bigger and biggerEveryone knows that the gang of speculators on Wall Street is the most greedy guy in the world.Let's take Zhang San and Li Si just now as an analogy.For Zhang San, this is a sure-fire investment.But Li Si is not a fool either, and through statistical analysis, they have found that the default rate in a booming market is less than 1.Therefore, if Li Si does 100 such insurances in a row, then he can get a total of 50 billion US dollars in insurance money, and if one of them defaults, the compensation amount will not be more than 5 billion US dollars, and my sister can still earn 45 billion US dollars!
What a deal!
As a result, most of the "Zhang San" and "Li Si" on Wall Street and the "Zhang San" and "Li Si" from various countries around the world - these Zhang San and Li Si are all over Europe, America, Japan and many countries in Oceania!
In the more than ten years of growth in housing prices in the United States, we are enjoying an unprecedented carnival of wealth.It's just that if the real estate market in the United States has been so hot, then whether it is CDS or other CDX and CDXIG, they will be able to bring huge profits to these speculators, but things will be the opposite, and no matter how hot the market is, there will eventually be a decline or adjustment day, once the market declines, then this group of speculators will inevitably pay a huge price for their madness.No matter how hot the U.S. real estate market is, the rise in home prices is bound to be limited.Once the house price rises to the point where it can no longer rise, then these financial derivatives will immediately have no one to take over.In particular, the Fed raised interest rates 17 times in a row in the two years between 2004 and June 2006, raising the federal funds rate from 1 to 5.25.Interest rates have risen sharply, increasing the burden of home buyers' loan repayment, and the real estate market in the United States, which has been hot for more than ten years, has finally risen irrepressibly, as the lyrics of a song say, "I will vomit out what I eat, and I will give back what I take."
Thus, an economic collapse with subprime mortgages as the fuse began, which later generations called the "subprime mortgage crisis"!
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