The 2008 global financial crisis is a crisis of subprime loans, CDO bonds (collateralized debt obligation which are asset-backed securities related to subprime mortgage type) and other financial activities on Wall Street. But the American television station CNBC propose another version.
Guilty of the crisis in the world is China, not bankers on Wall Street, according to a study by the Erasmus Research Institute of Management. It shows that China’s saving frenzy led to cheap money that fueled the housing bubble in the U.S. market and its collapse. It is unlikely that this bubble has been created by exotic mortgage products, says the author of the study, Heleen Mees. These products represented less than 5% of all new mortgages between 2000 and 2006.
On the credit boom of 2003-2004, namely that of individual consumption growth stood expansionary monetary policy pursued by the U.S. central bank (FED) in early 2000, says Mees, author of three books, Adjunct Associate Professor at New York University’s Wagner Graduate School of Public Service and Assistant Professor in economics at Tilburg University. She’s also a contributing editor to “Foreign Policy” magazine. Her latest book, published in the Netherlands in 2009, is “Between Greed and Desire – The World between Wall Street and Main Street”.
This predisposition of Americans to consumption fueled the economic growth in China and urged the country to make savings.
The study, which compares the responses of financial markets in the U.S., China and Germany to quarterly GDP growth from 2006 to 2009 shows that China has saved the equivalent of half of GDP for the period. These savings were mostly placed in fixed income assets, such as government bonds, which had the results of reducing the global interest rates from 2004 to present.
Lower interest rates have triggered the boom in the U.S. housing market due to the easy access to cheap money.
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