Friday, 14 October 2011

What caused the Credit Crunch?

                                                           What is a Credit Crunch?

"A credit crunch (also known as a credit squeeze or credit crisis) is a reduction in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from the banks"   (http://en.wikipedia.org/wiki/Credit_crunch)

But what caused the Credit Crisis of 2008???

Several factors were responsible like:

- Sub-prime mortgages
                               - Collateralized debt obligations
                                                                          - Frozen credit markets
                                                                                                          - Credit default swaps

Don't know what these fancy terms mean?

For an illustrative explanation, view the following video:


Reference:
  • Credit Crunch, Wikipedia                                                                                http://en.wikipedia.org/wiki/Credit_crunch
  • The Crisis of Credit Visualized- HD                                                                                                 http://www.youtube.com/watch?v=bx_LWm6_6tA&feature=related

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