Global Economic Slowdown – Article Example
Global Economic Slowdown The economy was booming, so many questioned this idea but many thought that free market and free enterprise could take the effects if the law had adverse implications. Well, the sub prime mortgagees started to default on their payments because either they didnt have the money probably because the interest rates went up because they were a risk in giving a loan to begin with or they choose a bad loan that the rate was not fixed. Therefore, now banks across America are super scared of loaning money because they are terrified that if they give out more money, they will continue to lose it and loans will default. The credit crunch is causing money to be real tight. This is why major banks like Lehman Brothers went bankrupt and Fannie Mae and Freddie Mac were bailout by federal government in attempt to keep it from tanking rock bottom.
Now, the stock market is losing so much money because there is a major credit crunch and investors are very nervous that a major recession is on the way. A recession is all the good and services down from the previous two quarters or more. 700 billion dollar bailout is taxpayers buying all the dead mortgages out, so banks will start freely lending money to people once again. Loans are still given out but at much a higher rate. Central banks across the world are cutting rates in a effort to make more money available and flow more freely.
The UK is affected because most of all the business is centered around America. Unfortunately, this is the way it is. With the global economy, if the U.S. is in trouble, then the world is in trouble.