Financial Melt Downs What are the causes and implications
Causes In United States, the banks/lenders did not have a strict lending guidelines. Almost everyone who can meet the minimum requirement was able to get a mortgage. The house purchased was secured against the property. The lenders then issued mortgage backed securities and when payments stopped coming, it created an effect everywhere in the industry.
Causes In Canada, the mortgage rates Canada are a little more stable than in the United States. The regulations are tough, it might be something we don’t like at times but it is for our own benefit. This is one of the reasons why Canada was not affected as much as United States at the time of recession. The mortgages are the backbones of any capitalist country’s economy and if they are not managed well, bad things can happen.
Implications In the end of the day, it is the customer or an ordinary Canadian who suffers from the financial meltdowns. Be it United States, Canada or any other country, the implications are mostly transferred from top to the bottom. We have noticed in the 2009 financial crash in the United States that there were some “untouchables� in the United States who were never questioned.
Implications The biggest implication of bad/weak economy is to the economy. It can have following implications: - Less jobs - Less capital/investment available to businesses - High taxes (such as property taxes) - Low ROI on investments - Weak Currency