hey /biz/, can someone explain the great recession, the "

>>1100174
Basically the economy was doing growing and banks were handing out loans left and right.

Since the economy seemed to be doing so well, nobody worried and people took lots of loans.

Loans proved a very profitable investment, especially real estate loans. You see, amidst all this lending and buying the prices of real estate went up and up and up! So lending to someone who wanted to buy a house was incredibly low risk. If he paid back, well he paid back and your profit was the interest. And if he defaulted, you got the house for which the loan was taken. By that time the house was worth more than the initial loan and thusly, you could make profit regardless of whether the debtor paid back or defaulted.

Then once banks ran out of low risk loans to give, they figured they could still keep making money by giving out riskier loans and disguising them as safe

There were lots of complicated transactions done with loans, and there were these things called CDOs. A CDO was a bunch of loans put together and then sold as one security. Basically people invested their money into investment funds and those funds bought CDOs. This is important, because now banks gave absolutely no shits whether the loans were good or not, ie they gave no fucks whether people paid back or not. They gave out the loan, and sold it as part of a CDO. The buyer carried all the risks involved with the loan.

It was like the hot potato game with a timebomb. It was obvious this shit would blow up, but if you were quick enough to sell the hot potato to someone else before it happened, you made profit and were off the hook.

Once the real estate prices skyrocketed to the roof and it became extremely fucking obvious to absolutely anyone how overpriced they were, the prices plummeted.

This fucked everyone over and soon people ended up with debts that were bigger than the values of the houses they were taken on. So if they defaulted, the would actually gain money.

>>1100200
And once everyone started defaulting, lots and lots of people with their money invested in CDOs, the real estate and whathaveyou lost the huge majority of it. Lots of banks went bankcrupt and those that didn't stopped loaning. All businesses dependent on loans for their everyday stuff we're fucked and had to lay off people to not go bust and still remain solvent.

So yeah once shit hit the fan everyone holding a potato lost, and as a chain reaction, others suffered as well.

Will China or commodity/oil loans go to shit this year and will it spark a similar crisis?

ok thank sounds good simple enough, please help me I want to understand all there is about economics and business and things like bubbles and recessions and booms and collapses and how stocks and global markets work.


bump

>>1100354
Are you kidding me?

How old are you?

>>1100354
How did u enjoy Big Short?

I think someone just watched The Big Short

File: 1416556386263.png (574KB, 557x495px) Image search: [Google]

574KB, 557x495px

You don't make an economy, with out breaking a few windows.

>>1100428

More like babby's got homework.

>>1100432
>12 yearolds study economy

yeah I just want to understand economics and business and finance and know all the ins and outs of it and how things work and how booms and busts and bubbles and collapses work, please help me /biz/..... how do economics and global markets function