The Causes

of
Global
Subprime
Crisis in 2008

Housing Market Bubble

Demand of housing
housing
, price

Supply of

the supply of housing is slow to

respond to the increase of demand

The ability of cheap

credit
the wake of dot-com burst in the
2001September 11
lower the interest rate to only 1%

Mortgage
broker
transfer the responsibility for those loans on to
others in the form of mortgage backed assets
packaging these bad mortgages with other
mortgages and reselling them as
investments.
Thousands of people took out loans
larger than they could afford profit
A lot of people got rich quickly and people wanted
more

Subprime loans

Unable to repay

The housing market Burst

bring down the housing prices in
market
made many houses worth much less
than the mortgage value

The credit well dried-up

housing prices could not go up
anymore.
investment banker is holding a full of
worthless house

The Causes of
Asian Financial
Crisis

Credit Bubble

sharp increase in asset values

Hot money flows were cumulative since
the higher interest rates in the East

financial deregulation created more loans

Higher Interest Rate

U.S Federal Reserve Bank began to raise U.S
interest rate to fend off inflation
For Asian currencies pegged to the U.S. dollar
Southern exports to
become more
expensive

less attractive as a
place to shift hot
money flows

currencies started to
fall

Currency Attack

Asians governments had raised their

interest rates to extremely high levels
policies cannot support for long
central banks were significant loss foreign
exchange reserves
forced to float their currencies

 Thai government float the Bath in July 1997

Market went panic
Many of Asian countries faced falling
currencies, devalued stock market prices,
rise in private debt
They could not repay
countries started to default and then went
bankrupt