Convenient truths about the global financial crisis.
Photo by Jim Marks
Between 2004 and 2006 interest rates in the US rose from 1 percent to 5.35 percent. Homeowners began defaulting on their mortgages, particularly ‘sub-prime’ loans (high-risk loans to people with bad credit records).
By September 2008, 4.6 percent of US mortgages were 90 days in arrears. More than seven million Americans are expected to default on their mortgage payments by the end of 2010. Four million will lose their homes.
Banks all over the world, which had bought US mortgage debt as an asset, suddenly owned a lot of bad debt. Billions of dollars were lost from their balance sheets.
Banks started running out of cash and had to borrow money from each other. Soon there was no one left to borrow from. Beginning with Lehman Brothers in the US, banks all over the world began to collapse.
The US Government bailed out its financial industry at a cost of $1.18 trillion. The cost of the EU rescue package was $2.18 trillion, to buy faltering banks and guarantee loans. The UK’s government rescue package amounts to $1 trillion.
In October 2008 Iceland declared national bankruptcy, and became the first Western country since 1976 to accept an International Monetary Fund bailout.
The Bank of England says the world’s financial firms have lost $4.82 trillion. More than 100,000 banking jobs have been lost worldwide.
Bonuses paid to Wall Street executives in 2007 totalled $56 billion—an average $311,000 for each of the 180,000 people employed by Wall Street firms at the time.
Globally, taxpayers have now spent around $13.39 trillion (that’s $13,392,103,900,000) to shore up the world’s banks. That amount is predicted to increase.
The UN estimates that the cost to end world hunger completely, along with diseases related to hunger and poverty, is $329 billion a year. $13.39 trillion would fix world hunger and poverty for two generations (40 years).
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