So+what+caused+the+current+economic+crisis? 

=Subprime Mortgage Crisis =

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The subprime mortgage crisis refers to the current situation in which peope have made mortgages but failed to pay them back thus making many lose money. In the beginning of the 21st century, the global economy was prospering and the prices of houses were going up at tremendous rates. Because of this, people were buying houses and selling them almost immediately in order to gain profit. Because so many people wanted to buy houses, they started to loan money from the banks and the banks established a system where they lend mortgages to these people and have them pay back over a certain period of time. This system was working out fine because people were eager to buy house as and they were able to pay back the mortgages quickly due to the profit they earned. The banks also promoted low introductory interest rates so that people would be hooked.

However, when people were not making as much money as they hoped to, they started to default on their mortgages and they were soon labelled as “subprime” burrowers because they were much in debt. Since these people were not paying back their money, the banks lost money also. Also the intermediaries involved in the Mortgage Backed Security were losing money because the subprime burrowers weren’t paying back their loans. Also the new houses on the market were decreasing in value that discouraged people to buy houses.

This impacted the global economy because of the Mortgage Backed Securities system where they pool all the mortgages together and divide it up and sell shares to people all over the world. These very people all over the world were not making any money since nothing was being paid back by the subprime burrowers.