Posted on September 30, 2009 by Julie Spaulding

Most people around the developed world are now aware that a global economic down turn is taking place, and in some countries a recession is in full force. However, it is not common knowledge what actually started this fateful chain of events leading to the loss of thousands and possibly millions of jobs worldwide. What happened was this: banks were approached by thousands of possible new home owners asking for loans. This was during a period where the United States real estate market was climbing fast, and the value of homes was rising quickly. The banks approved these ‘bad’ or ‘sub-prime’ mortgages under the mentality that if the new home owners were to foreclose, the property would have a higher value than what it originally was due to the climbing real estate market, meaning that the bank would not lose money but make a profit! What actually happened was that the real estate market crashed, and banks were out of pocket due to the massive numbers of foreclosures on mortgages occurring. This set off the global financial crisis, which led to a global economic downturn and the recession in most developed countries. All that because of some bad debts in the States!