Financial crises

They invlo0ve speculation when assets are bought, they involve speculation when assets are bought, in the hope that the price will rise, or sold, inthe expectation of a fall in the price
1. Financial crises are characterized by: *An increase in speculative activity, market euphoria, and rapidly prices. *A turning point which leads to panic selling, extreme pessimism, and rapidly decreasing prices. *Spreading to domestic and foreing economies.
  1. *Euphoria: extreme happiness with a situation. *Mortgage: a loan made to someone for the purpose of buying a house
2. Securization is when on the strenght of the future income from loans, they borrowed more money by issuing bonds which they sold to other financial institutions in the USA and broad.
3. Credit crunch 2007-2008: There was much speculative activity in the US property market. Houses prices were rising and financial institutions were happy; but lenders did not keep these sub-prime mortgages on their books
Crises happen when the speculation destanilizes the market causing prices to rise or fall dramatically
The resulting fall in prices causes panic in the market with investors rushing to off-load their assets leading to a market collapse

Resource summary

	Created by Abigail Dector Arriaga over 5 years ago