Mar
18
the big picture Q&A
Following the last post, a couple of questions came up:
How could it be that bad quality mortgages in the US could have such an effect on the global economy? Is it because we are so tightly connected to the US economy or is it because something similar happened everywhere?
I would say it's a mixture of both. As is explained in the video, bad quality mortgages were repacked and - above all - revalued, and sold all over the place. So any financial institution you might think of - pension funds, commercial banks, investment banks, hedge funds, even governments - could have bought that stuff. And yes, something similar happened elsewhere, since credits were relatively cheap more or less everywhere, and were given away with too little scrutiny.
How could it be that bad quality mortgages in the US could have such an effect on the global economy? Is it because we are so tightly connected to the US economy or is it because something similar happened everywhere?
I would say it's a mixture of both. As is explained in the video, bad quality mortgages were repacked and - above all - revalued, and sold all over the place. So any financial institution you might think of - pension funds, commercial banks, investment banks, hedge funds, even governments - could have bought that stuff. And yes, something similar happened elsewhere, since credits were relatively cheap more or less everywhere, and were given away with too little scrutiny.
