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The GFC Explained

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by

Cameron Williams

on 1 September 2016

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Transcript of The GFC Explained

Glossary
1 - Sub-prime
The GFC Explained
By Cameron Williams
3 - Credit Crunch
2 - Liquidity
Sub-prime

Sub-prime is a classification of borrowers with a tarnished or limited credit history.

Approximately 25% of mortgages are classified as sub-prime.
Liquidity
Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price.

Credit Crunch
A sudden reduction in the general availability of loans or credit


When, Why and Who
Timeline of the GFC
2008
2009
In 2008...
Jan 9 - World bank predicts slowdown of global economy

Jan - March - more than 850 US companies go into administration

Sept 14 - Lehman Brothers announce bankruptcy

In 2009...
Jan 12 - US President Bush requests for TARP funding to be spent

Feb 17 - US President Obama signs new legislation 'American Recovery and Reinvestment Act 2009'

March 11 - Freddie Mac announces a net loss of $50.1b for 2008

Why did the GFC happen?
Who caused the GFC?
2008 - US and UK governments struggle to rescue finance giants from bankruptcy

Credit Crunch
- decrease in consumer confidence

Sub - prime crisis
- home owners unable to pay mortgages

House price collapse

Alan Greenspan

- Chairman of Federal Reserve from 1987 - 2006
- Encouraged home owners to take out ARM's

Martin Feldstein

- Director of American International Group
- Was bailed out by US government for $180b
Contents
Glossary
Outline of GFC
When was the GFC?
Why did it occur?
Who was responsible?
Current effects of GFC
Current effects of GFC

- GFC a global event
- World still recovering
- Financial markets cautious
- Central banks work together
Outline of GFC

- Major collapse of global economy
- Widespread effects still felt today
Full transcript