Analysis of American Subprime Crisis and Wall Street Financial Storm

Abstract: The subprime mortgage crisis is the result of financial speculation, and its main reasons are improper macro-control, imbalance between the real estate market and financial institutions. The subprime mortgage crisis triggered the depreciation of the US dollar, the rise of oil prices and the slowdown of many countries' economies, and its global impact will last until the end of 10 or 2008. By analyzing the American subprime mortgage crisis and global financial turmoil, we need to study and grasp the integrity of the financial system, the liquidity of financial capital, the fragility of the financial system and the periodicity of financial fluctuations, so as to plan ahead and improve our ability to control the market economy.

Keywords: subprime mortgage crisis; Financial turmoil; macro-control

In April, 2007, American New Century Financial Company filed for bankruptcy, which marked the official outbreak of subprime mortgage crisis. Over the past year, the impact of this crisis has intensified, forming a "butterfly" effect, triggering international financial turmoil and causing global stock markets to plummet. The subprime mortgage crisis caused US$ 460 billion in bad debts. Due to the securitization of bad debts in the United States and the speculation of financial institutions, it has now spread to the whole world, affecting financial institutions and banks in many countries. It is estimated that the final loss will reach $654.38 +0.2 trillion, and its loss and harm are gradually emerging. This matter is far from over. It is predicted that the global impact of the US subprime mortgage crisis will last until the end of 2008 10 or the end of the year. When the United States sneezes, the whole world catches a cold, which is the sensing effect brought by financial internationalization and economic globalization.

First, the content and characteristics of American subprime loans

Sub-prime real estate loan, referred to as sub-prime loan, is a mortgage loan with real estate as collateral. The real estate mortgage in the United States is divided into three markets, the first is the primary mortgage market, the second is the secondary mortgage market, and the third is the secondary mortgage market. Subprime loan policy is very attractive to low-and middle-income buyers, because it has three characteristics: First, the down payment of subprime loans is low, and some subprime loans even have no down payment, which is particularly attractive to low-and middle-income people. Generally, mortgage loans have a down payment, accounting for about 20%-40% of the total, and the low down payment of subprime loans has aroused people's desire to buy a house. Second, the term of subprime loans is long, some of them repay the principal and interest in 20 years, and the long repayment period makes the lender less stressed. Third, the subprime interest rate is low before and then high, that is, the interest rate is low in the first two years, and the interest rate is high at last 18, and the interest rate is higher when it is close to 20 years. These three characteristics make low-and middle-income people actively borrow money to buy a house, and the real estate price rises rapidly, and a luxury house can reach millions of dollars at most.

The original intention of setting up subprime loans in the United States is good, aiming at solving the housing difficulties of low-and middle-income people. After the introduction of this measure, the private housing rate in the United States increased by 6 percentage points, which solved the housing problem for 654.38+0 billion low-income people. In the United States, children 18 years old are basically independent, and the remaining parents constitute the miniaturization of the family. The subprime mortgage policy caters to the living habits of Americans and better satisfies the desire of Americans to buy houses. However, the law of supply and demand in the market economy is inviolable. Subprime loans stimulated the real estate market and destroyed it. Because the real estate price in the United States soared at that time, both sides of the credit had a psychological bottom line, that is, they finally sold the house and repaid the loan, but they couldn't afford it anyway. As a result, something went wrong here, and house prices fell by 40% continuously, so the real estate market collapsed and finally the subprime mortgage crisis broke out.

Second, the reasons for the subprime mortgage crisis

Fundamentally speaking, the subprime mortgage crisis is the result of financial speculation. American finance is the leader of global integration. Many banks issue loan securities (MBS) and sell bonds (CDO) after forming debts. After the hype of financial institutions, it has spread to the whole world and formed a debt chain. When the debt chain breaks, it will have a domino chain effect and trigger global financial turmoil. The reason is mainly caused by the collection of three factors.

(1) Improper macro-control. In order to effectively regulate the economy, Greenspan first cut interest rates several times before 2003, from 5% to 1%. Interest rate cuts have reduced the cost of loans, induced many people to buy houses with subprime loans, and fueled the "bubble" of real estate. Subsequently, in order to control inflation, the Federal Reserve raised the deposit and loan interest 13 times in a row, and by the beginning of 2006, it was adjusted from the initial 1% to 5.3%. Because the interest rate is high, the cost of repayment will be high, and the principal will roll interest, which will increase the pressure on borrowers. The U-shaped trend of the Fed leading the loan interest to fall first and then rise laid a curse, which led many people to buy houses with low interest on subprime loans, and then it was difficult to repay them with high interest, which eventually triggered a crisis.

(2) The real estate market is unbalanced. Real estate in the United States began to cool down in 2006. After the "bubble" burst, the real estate price plummeted. The house that originally sold for 6.5438+00,000 yuan can only sell for about 600,000 yuan, and the real estate has shrunk and fallen. This made the people who finally expected to sell the house and repay the loan unexpected, and the house price fell to the point where it could not repay the loan. The subprime mortgage crisis finally surfaced, triggering a financial storm.

(3) Financial institutions add fuel to the flames. In order to maximize the benefits, financial institutions compete to speculate on the securities and bonds of real estate loans. Speculation has expanded and spread all over the world, involving many countries and banks, thus triggering worldwide financial fluctuations and risks.

The American subprime mortgage crisis is a historical coincidence. Now imagine: if the Fed had not raised interest rates, the loan interest would not have been so high; If the real estate price in the United States is still rising, there will be no problem for homeowners to repay their loans; If only to stimulate mortgage loans, there would be no financial derivatives speculation by securities companies and bankers, and there would be no global financial crisis. The actual result is precisely the cross-infection of these three problems, which will inevitably lead to the subprime mortgage crisis in the United States. Everything happens for a reason, not by accident, but by accident in necessity. This is the dialectics of history.

Third, the consequences and harm of the subprime mortgage crisis

Like a computer virus, the subprime mortgage crisis in the United States immediately spread to every corner of the global financial system, bringing many global problems, including the current stock market crash and financial turmoil.

(1) The subprime mortgage crisis triggered the depreciation of the US dollar. The United States is in a dominant position in the world. George W. Bush hopes that the depreciation of the US dollar will stimulate foreign trade exports, reduce imports and reduce the US foreign trade deficit. This is his basic foothold. After the depreciation of the US dollar, the United States can print more US dollars to send inflation to the world. The European Union, Japan, Russia and China all responded, and prices rose and the economy slowed down. For example, on the issue of RMB appreciation, the exchange rate between the US dollar and RMB began to appreciate on July 2 1 day 19:00 in 2005, and now it has appreciated by 18.2%, and the exchange rate has exceeded the 7 yuan mark. By the end of 2008, the exchange rate of RMB against the US dollar will rise to 6.6 yuan, then to 5 yuan, and finally to 4 yuan in 2020. Another reason for RMB appreciation is to reduce exports, increase imports, and reduce foreign trade surplus and foreign exchange reserves. America's suppression of RMB appreciation is intended to reduce the foreign trade deficit. There are internal and external factors, just like the two ends of the "balance", one end is the depreciation of the US dollar, and the other end is the appreciation of the RMB. This is a linkage process. The depreciation of the dollar has accelerated the appreciation of the renminbi and sent inflation to the world. Now prices in Russia have also risen sharply, and the European Union, Japan, Singapore and South Korea have also been affected, and prices are all rising. Therefore, in the face of rising prices, the central government put forward "two preventions", strengthened macro-control, used financial, taxation, monetary policy and other economic levers to regulate prices and the stock market, changed the mode of economic development, vigorously promoted energy conservation and emission reduction, and ensured sound and rapid economic development.

(2) The subprime mortgage crisis triggered an increase in oil prices. After the depreciation of the US dollar, the futures oil prices in the United States, new york and London are as high as $ 150 per barrel (seven barrels are 1 ton), and one ton is about $ 1 000, equivalent to about 6,800 yuan. Oil is the soft gold in the world. After the rapid economic development, oil is the blood of the economy. At present, China's annual oil consumption is 270 million tons, second only to the United States, and it is the second largest oil consumer in the world. If the oil price rises, it will lead to the price increase of many domestic products, and domestic prices will have a "blowout" effect. Now Sinopec and PetroChina report to the NDRC every day that half of China's oil is imported. If the oil price does not rise, it is upside down and losing money. The National Development and Reform Commission has to grant financial subsidies of 654.38+0.2 billion yuan, so as not to raise prices. In 2007, China's prices rose, with oil as the industrial product and pork as the non-staple food. Because there are too many monopoly industries in China, the resource management is not in place, and the product cost cannot be reduced. Power, oil, coal and other resource industries all demand price increases, but people are afraid of price increases, which puts the National Development and Reform Commission (NDRC) in a dilemma, that is, enterprises will raise prices on the one hand, and people are afraid of price increases on the other. If economic problems are not solved, it will lead to social and political problems and affect social stability and harmony.

(c) The subprime mortgage crisis triggered the economic slowdown in many countries. Due to the depreciation of the dollar and the rise in oil prices, the economic development of the United States began to slow down. In 2007, the GDP growth rate of the United States was 2.2%, which was 1 percentage point lower than that of 2006. The GDP growth rate in the first quarter of 2008 was 0.4%, and it is expected to be only 1% in the second quarter. It is estimated that the GDP growth rate of the United States will be around 1.5% in 2008, and the most pessimistic thing is that Goldman Sachs predicts only 0.8%. The United States, Japan and the European Union are known as the "three engines" of world economic development, and now they are all slowing down, while the BRIC countries (China, India, Russia and Brazil) are rising and will lead the new trend of world economic development.

Four. New features of the global financial system

Through the analysis of American subprime mortgage crisis and global financial turmoil, we find that there are many new features in the world financial system, which need us to study and grasp.

(1) Integrity of the financial system. The globalization of the world economy is first manifested in the internationalization of currency and the integration of financial system. Now, the integration of the global financial system has formed a new pattern of linkage and complementarity. If something goes wrong in one place, it will immediately cause a chain reaction. This requires us to grasp the situation and trend of the financial system as a whole, and not to look at economic problems in isolation and one-sidedly.

(2) the liquidity of financial capital. The global financial capital is nearly1000 trillion US dollars, and the western developed countries have excess capital. About $8 trillion in liquidity is in the hands of some financial predators, who are looking for speculative opportunities around the world. One of them is a financial tycoon named Soros, who has hundreds of billions of dollars of "hot money" in his hand. 1997, he saw that the Asian financial market had just opened and was very fragile, so he went to the Thai financial market to stir it up and fled, which led to the devaluation of the Thai baht that day, which triggered financial risks throughout Southeast Asia, and China and Hong Kong also suffered greatly. If there is more international hot money, it will run around and drill in places with holes like rats, so we should pay more attention to safety after the financial system is opened. Now, several major financial crises were caused by international hot money speculation. For example, 1997 devaluation of the Thai baht triggered the financial risks in Southeast Asia, 1998 Russian financial crisis and 1999 financial turmoil in Brazil, all of which are the consequences of international hot money flows. In China, these international hot money will basically speculate in four "cities", and they are all very regular. The first step is to speculate in the futures market, raise prices through gambling and disrupt the national price system; The second step is to speculate in the stock market and bake it up, and there will be a "bubble" in the stock market. After reaching a high level, they will withdraw their funds and escape, trapping domestic investors and retail investors; The third step is to speculate in the real estate market and flee after forming a real estate "bubble"; There are also some experts who carry out the fourth step, that is, speculation in the foreign exchange market and making money from exchange rate fluctuations. These financial predators have made a fuss about the futures market, stock market, housing market and foreign exchange market, speculating to a certain extent, changing the money of ordinary people and investors into dollars, leaving behind a financial disaster, which has become a formula and basic law.

The fragility of the financial system. When something goes wrong in a certain link, it will immediately form a "butterfly" effect, and the whole financial system will have a chain reaction, because it is integrated and global, and this general trend cannot be contained. Although the subprime mortgage crisis itself is only a few hundred billion dollars, it has spread all over the world. China stock market is far from the United States, but it has also been affected. Shareholders are speculating about confidence and expectations. If confidence and expectations are gone, the stock market will fall badly. Now, the subprime mortgage crisis has spread rapidly, causing disaster, which is caused by the fragility and sensitivity of the global financial system.

The periodicity of financial fluctuations. The operation of the financial system is cyclical. Only by carefully understanding and grasping can we plan ahead and control the changes in financial situation. From studying Marx's Das Kapital, we know that capitalism has an economic crisis. During the crisis, there will be phenomena such as excessive milk pouring into the sea, unsalable products, factory closure, unemployment of workers, soaring prices and so on. This is the economic crisis in the primary stage of that era and the crisis of overproduction, which is the basic feature of the current crisis. Today, with the development of economy, economic globalization and capital internationalization have become a reality. No matter which country or place has an economic crisis, the financial crisis is the first manifestation, so financial security is very important. It is a new law of world capitalist economic crisis to change from overproduction crisis to financial crisis. After 30 years of reform and opening up in China, there have also been some cyclical laws, such as economic overheating, which basically occurs once every 8- 10 years. 1982- 1984, China's economy overheated for the first time and was rectified; 1994, the second economic overheating occurred, and the second rectification was carried out; At the end of 2006, the economy overheated for the third time. China's stock market is also changing periodically, with basically five bears and three bulls. It is dialectical that the stock market is "how long it is horizontally and how high it is vertically". What we need to master now is periodicity and accurately grasp the economic trends and laws, so as to plan ahead, improve our ability to control the market economy and remain invincible forever.

From the perspective of the United States, the advantages of market economy have two basic characteristics: first, optimize the allocation of resources with market laws and value laws to improve the efficiency of resource use. Second, diversification of property rights encourages competition and provides inexhaustible motive force for economic development. However, the market economy also has negative effects, and some problems will appear periodically. In the era of planned economy, the main danger of the economy was inflation, because it was a shortage economy at that time, demand was often in short supply, and prices would naturally rise. There are inflation and deflation in market economy, which appear alternately, but the main danger is deflation, that is, overproduction, low price and insufficient consumption. 1998-2005, China experienced deflation for eight years, and the economy paid a huge price for it. At present, China is once again carrying out macro-control to prevent inflation, but we should pay attention to the rhythm and intensity of the control, focusing on braking, not sudden braking, which will easily lead to rollover. If monetary policy is excessively tightened for a long time, China may fall into deflation again by the end of 2009, and its economy will not develop greatly in five years. You can't expand as soon as you put it, but contract as soon as you tighten it. In recent years, China has been following this path repeatedly. Now we should pay attention to mastering the intensity of regulation. If deflation of 1998 occurs again, it will be difficult for our country, because our population base is too large and there are many vulnerable groups. Unless the economy develops to a certain speed, it will be difficult to maintain employment and stability, which is determined by our special national conditions.

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For reference only, please learn by yourself.

I hope it helps you.