How the Free Market Can Get Us Out of the Housing Crisis

Mortgages, terms from France in the 17th century, by people named Sir Edward Coco. This term is divided into two parts: death and death. This term means that if the mortgagee is unable to fulfill the promise to repay the mortgage, the transaction is not terminated, but the land is acquired from the mortgagee. As they encountered these problems early in France, we see history repeats itself itself today. In my opinion, more governments will not solve the vicious circle of the real estate market.

The economic crisis of 2008 resulted from the crisis of the US mortgage market. Initially, many banks provided mortgages to subprime mortgage customers, expecting to raise profits due to the boom in the real estate industry. The problem is that the risk assessment method does not take into account the risk of providing loans to customers of subprime mortgage loans. Those who are responsible for evaluating these risks are blinded by human error such as greed, fear, uncertainty. As a result, many financial institutions began to collapse when the housing sector prices began to decline due to unpopularity. Many banks went bankrupt. The US and the world economy have experienced a sharp decline. This is because related risks are not assessed on a large scale.

In this article, we will focus on the mechanism of the housing crisis from the housing crisis, taking the US mortgage crisis as a specific issue. Therefore, what we emphasize in this article is not the origin and cause of the subprime mortgage crisis, but how to amplify this crisis and turn it into a general banking crisis. Before explaining the first mechanism, I will briefly explain how the market underestimates the risk inheritance of the subprime mortgage market. In this regard, we show how the introduction of the ABX index revealed the weakness of the housing market and the subsequent worsening of the balance sheet of the bank. But we must also consider that the US housing loan crisis will change to a global banking crisis on a global scale. It began with two German banks who have invested heavily in the US subprime mortgage crisis. This caused wide concern among banking institutions.