Financial crisis

Yesterday, i was talking about global crisis and today i found a well written blog by an mba applicant on the present scenario in US.

“So, the financial system is in a deep mess. I am not saying I understand it all, but if someone asked me to summarize the gist of the problem I’d say it’s this – please correct me if I am completely wrong:

We, or rather US creditors in the first place, gave loans to people (American consumers) for everything from houses to cars to other consumer goods, no matter what their creditworthiness. Consumers happily spent away, America basically paid for the worldwide economic upturn over the last few years. But they paid for it with money they didnt have. Eventually, the first people were unable to pay back their loans, interest rates climbed and even more people had trouble making their payments. That’s how foreclosures started. House prices began to sink, thus making it harder for people to finance their other debt and the downward credit spiral began. That’s why now people default on their consumer credits as well. And the rest of the world is financially also in trouble because all those debts can be purchased by other parties using a complicated system of derivatives that apparently not even those that should know understood.

To make a long story a little shorter: Things suck at the moment. Jobs, especially in finance, will become scarcer. Which will lead to more competition in other job areas, such as consulting.”


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