Question

In: Finance

Describe how the credit crisis may have adversely affected many people beyond homeowners and mortgage companies....

Describe how the credit crisis may have adversely affected many people beyond homeowners and mortgage companies. Do you believe the impact of the credit crisis is still being felt today? Why or why not?

Solutions

Expert Solution

The credit crisis always have a long term impact in the economy. It is not just about the mortgage and the homeowners who were hit in the great depression.

The credit crisis hit a gambit of Companies who were involved in any type of credit creation .It can be said to have insurance companies and Investment bankers and different types of banks who were merged in order to be saved.

It left a lot of people getting unemployment and demand completely evaporated which created a fear and panic in economy.Economy is an interrelated web of financial activities so many of the people who invested their life savings into some equity funds , lost a chunck of it. The money supply got soaked up and there wasn't much liquidity.

It's effect can be felt even today as the Main structural problem was not corrected, it was deferred for future. It can be seen through the the unemployment data in recent economic choas . The funds Who lost their money in previous depression didn't even recover enough to pay enough to the fundowners .So the impact can be said to be long lasting.


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