Below is a short piece of a paper i wrote a couple of months ago. It describes and investigates what caused the financial crisis in 2008. I did not write this paper with crypto in my original ideas, but after finishing it, i sort of realized that crypto could be the answer to the problem. Anyways i think the crypto community would have to keep on implementing crypto to society, and it will be a hard and long battle because it will change a billon dollar industry. I will probably make a series of posts, as it is quite a long paper.
Introduction
In 2008, a global economic crisis occurred. The crisis was based on the US housing market. The US housing market was hit before the crisis was considered highly stable, which also made it attractive for investors. In the years to come, the US economy showed that something in the economy suffered from the massive upturn that the country had experienced since 2002. Michael Lewis wrote in 2010, a book that followed some of the people who managed to predict it economic crisis, and therefore speculate against the US housing market. The author also gives through the book, expressing his personal views and perspectives on the crisis, and representing various other ideological and political attitudes in the book. After the financial crisis there have been many prosecutors subsequently. The popular view of the crisis is that it was created by greedy banks on Wall Street, which utilized the social scourge between rich and poor in the United States and how the rescue of the banks in 2008 by the state was a necessity but also reflected that inequality favored upper class.
The origin of the financial crisis
1.1 Introduction:
In 2008, the United States was hit by one of the worst economic crises ever. Several factors in the US economy affected the crisis. The US housing market was hit by a bubble in the housing market over the years, which is often considered to be the one who started the chain reaction. Speculation in the market also helped to enlarge the bubble and enlarge the extent of the collapse. The US economy showed good results on several of the parameters that a country's economic situation is often being judged on, though there were factors that pointed to the direction of an unsustainable economy.
1.2 Speculations and the US economy
As in the past, the US economy was up against the financial crisis, characterized by general optimism. The majority of investors who wondered in the US housing market were marked by the overall optimism that was about the stability of the housing market in particular. The crisis came seven years after a collapse in the stock market that was related to internet companies. The bubble in 2001 was within the stock market, and the US housing market remained unchanged through the sharp fall in stock prices, which gave even more confidence in the stability of the housing market. The housing market on the surface looked very stable also made it a sought-after target, for investors from pension funds, due to the apparent stability and security it expressed.
Speculation in the US housing market occurred through bonds issued by primarily the major investment banks on Wall Street. It was the loans that were speculated, since a bond is a loan issue. The loans issued in the form of the bonds underwent a form of food chain before they ended with the investor. You can see the food chain for loans in the figure below.
The figure shows the connection between speculations and the US economy, as much of the US economy is dependent on the housing market. In the figure, one can also see that when a person takes a loan, they take the loan to a local bank, which then sells the loan to the major investment banks, most often banked on Wall Street. The investment banks then sell the loans, and as happens in the form of bonds, but the loans they can not sell, they sell as a collateralized debt bond, which is a collection of some of the most risky loans. It is often called the sub-prime loan, which was the main file of the CDOs, but because the CDOs were composed in such a way that they were, for example, from geographically different parts of the United States, they made it a Your risky investment, but the CDOs still had higher returns than normal bonds. Due. The view of the housing market's security became securities related to the housing market also sought. There was a free market in the US, which also resulted in the financial market meeting demand for securities related to the housing market due to the market mechanism. Demand for the loans thus went all the way through the food chain, as can be seen in the figure, and therefore lenders also offered more risky loans, and for them it was also coveted with the sub-prime loans as they brought higher returns when they were sold to investment banks. Between investment banks and investors, there were also valuation companies that lived in evaluating securities. The majority of the CDOs achieved the highest possible rating as competition arose between the companies and the higher the assessed assets, the better they were placed at the customers, that is, the banks. Since they were not exposed to errors in the event of error assessments, the majority of the assets were awarded the highest possible rating to maintain their customers.
So as i said in the beginning there will be more. I just have to translate everything, and it might take some time. But i hope that i did not make to many grammar or spelling mistakes, if i did please let me know. What do you think? Could crypto really solve some of these problems? I think it can.
Thank you for reading