What Are the Causes of Financial Crisis?

Financial crisis refers to the crisis of financial assets or financial institutions or financial markets.

Causes of the financial crisis

Purchasing a home in accordance with international practice

U.S. banks and financial institutions will buy homes due to liquidity and risk diversification

The investment bank was

Financial markets must be stable, and financial leverage must be reasonable. U.S. financial institutions are one-sidedly pursuing excessive expansion of profits, using a very small proportion of their own funds to achieve scale expansion through a large number of liabilities, and leverage ratios of up to 1: 20-30 or even 1: 40-50. Over the past five years, American financial institutions have used this excessively high leverage to create a huge market and false prosperity. For example, Lehman Brothers used $ 4 billion of its own funds to form a bond investment of about $ 200 billion.

Financial Investment in the United States

The interaction of the above five links has formed the source of the US financial crisis.

These six links are linked one by one, forming the spiral and growth chain of the US financial bubble. The destruction of one of these links will have a domino effect, which will eventually evolve into the financial crisis in the United States and the world today.