The credit crunch

With today economic headline again we linger on US Fed Reserve helmsman again after several times slashing of interest rate , sticking out his neck that his belief on the broader economy's recovery depends on the housing sector. As such i announced that much of our attention be drawn to the belief that house-buyers defaulters are the crisis locomotive in the made-believed downturn.Have we ever pondered further the true cause to the root of the crisis that has literally been fogging our financial systems for almost a century ?


I wouldn't have thought much before until my mind ticked on the basics of the algebra or any simple equation that even a primary kid could appreciate. For the house buyers who tend to obtain bank loan for the purchase would have their loan secured via a mortgage whose value is greater than the loan exposure.The periodic loan repayments are receivables or book debts and thus treated as assets in the Lender's accounts.Consider now the Money-lenders now want their obscene profits fast by adopting what a normal goods traders would do. This is what is happening now in the system that the money-lenders try to package them as one product which can be sold to anyone including the other money-lenders for quick bucks. Whoever money-lenders receiving the batons may repackage them for resale for another turn of profit.Now, subprime mortgage crisis broke out when the original house buyers defaulted the repayments.Ladies and gentlement, we 're talking of trillion of US dollars which has easily surpassed any GDP, if ever, generated by any super-powered nations.