Sunday, 15 January 2012

How and why West ended up in this financial crisis?

Here, in very brief , is why Europe and US is suffering from this financial crisis:
  1. Banks knowingly gave loans to the customers who were, for sure, not able to pay them back. This happened mostly in US.
  2. then banks sold these loans to other banks by mixing and making cocktail of the loans. This all just to earn more and more bonuses. Banks of Europe also joined this party.
  3. such cocktails were sold at higher and higher prices by one bank to another and to British game of "pass the parcel", with only difference that the parcel did not contain the gift but assets worth zilch so when music stopped, the bank which was holding the parcel lost everything. and in this game almost every bank had parcel when music stopped.
  4. so this way almost all western banks lost most of their market value and almost became bankrupt
  5. Now since all banks were "too big to fail" so govts saved them by paying money without asking anything in return
  6. since govts did not have money of their own so they had to borrow, and since banks debts were so huge that govts' debt became HUGE.
  7. thus most govts in West ended up becoming hugely indebted.
  8. and now to repay those debts, govt have to get money from somewhere so they are squeezing their own citizens, by cutting their pensions, social services, taxing them more.
  9. So as a result every citizen is suffering or will have to suffer
  10. So in a line citizens will be paying for banker's mistakes.

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