INTERNATIONAL BUSINESS ENVIRONMENT

International Business Environment

International Business Environment

Question # 3

The economic crisis is also identified as the credit crunch, which is the financial crisis, which influence the financial markets, which have been slow down for many years. High possibility of a mortgage, also known as subprime, are a particular type of financing, particularly used for the purchase of homes and customer-oriented to the lack of ability to pay, hence a higher risk than other loans. Nature of the interest is higher than consumer loans, but in the early years he was advertising interest, and payment of the result of the bank above. North American banks have a limit in the amount of loans they give, that imposed by the Federal Reserve System (FRS).

Since the debt may have a point of sale and purchase transactions and economic bonds, mortgages can be removed from the individual being transferred to investment funds or pension plans. In some cases, this investment can be made through the call to trade. The problem occurs when an investor (which may be a financial institution, bank or person) does not know the actual risk assumed. In a global economy in which financial capital works at high speed and change hands properly and that the proposed financial products is very complex and automatic, not all investors know the priority of the operation.

Gradual increase in types of interest from the Fed, and the usual increase in payments in this class of loans made delinquency rates and holding levels increase, not just the high risk mortgages. Evidence that the major banking entities and large investment funds set up their assets in mortgages with high risk of aggravated sudden contraction of loans. (Also known as the credit crunch) and large fluctuations of quotations, generating a spiral of lies and investment panic, and a sudden drop in the stock exchanges around the world, especially because of the lack of liquidity.

Several factors have been linked to show the path to financial crisis. Firstly, a huge speculative bubble, coupled with real estate. In the United States, as in many other Western countries, and then executes technology bubble of the early twenty-first century, between 2000 and 2001, was the flight of investment capital from both institutional and ties in the direction of ownership of the building.

The main reason for the financial crisis in the United States and around the world have been attacks on Sept. 11, 2001 became the international situation of instability that forced major central banks cut interest rates at a low level unusual for the resumption of production and consumption through credit. The combination of these factors led to the emergence of a large real estate bubble on the basis of huge liquidity. In the United States, buying and selling houses for speculative purposes was accompanied by a high range, that is, the mortgage that the sale was canceled, to return to buy another home with a new mortgage, not when the two operations are financed by a mortgage ...