How to create a bubble.
The SAR. LEKKA
Economist

Any profit is based on an episode basis. The creation of a bubble requires specific springboard. Usually the seeds sown in a speculative episode made the effort of healing wounds that have left the previous one. The seeds for example, credit, market and financial crisis of 2008-2009 had essentially richtei in the global economy and more specifically the U.S. economy was trying to heal the wounds from the bursting of the bubble shares hi technologias.Periodos 1999 -2000 the bubble of high tech companies in the world breaks epipedo.O Nasdaq Stock Exchange index of Wall Street, symbol of high-tech collapse in 2000 and by 2002 it loses 82% of its value, and off by 6 trillion. dolaria.I U.S. economy abruptly lands, investments stopped, unemployment jumps, while the terrorist attack of September 11 increases the uncertainty that the economic crisis has enspeirei.Se such cases there are no magic solutions. Dealing with such situations passes through increased liquidity and credit expansion by the leading U.S. central bank (Fed). Before I start the effort, in May 2000, the base rate of the U.S. dollar was at levels of 6.5%. The Fed reduced by 13 moves in the dollar rate to 1% in late June 2003, having escalate the cost of money at 550 basis points. The therapeutic properties of interest were encountered after the recession had occurred, but also had a side components and the international financial system has seen to excess liquidity. The seeds of the new bubble had pesei.Epeidi people forget easily, because the development creates good prospects, because the prosecution quickly for maximum profit turned into greed, creating a new bubble was anamenomeni.Afti time the field was speculation in the housing market U.S. and more specifically to low solvency loans (sub-prime loans). A market that was the period of prosperity to a 13% of total U.S. mortgage. The great liquidity led to increased demand for increasingly apodoseis.Fysika lending by banks has its limits, since in accordance with the credit restrictions must hold in cash 8% of loans granted to non-smooth face repaid their loans. To escape from the limitations found the solution of titlopoiiseon.Poulousan investment banks in their loans, directly received the proceeds of their loans so if there was no danger of losing their money to relax lending terms by granting loans even in cases where there was no guarantee a smooth repayment tous.Oi investment banks (the State had strong personality such as Fannie Mae and Freddie Mac) that buy the loans, titlopoiousan and issued the bonds sold to each customer (Hedge Funds, Pension Funds , etc.). The policy intervention here was strong in 1999 by President Clinton (U.S. President 1993-2001) that Fannie Mae and Freddie Mac under the policy of housing for the poor took orders relaxing serum purchased mortgage loans from commercial banks. Naturally, the search yields more and more products increase the demand for securitization resulting allocations are such that mazikotita safety limits to exeftelisthoun fully. Simple bonds have their place in a structured and elaborate titles, which are based on financial models and stock indices in the majority could not eklechthoun.Oi investors blindly purchased based on the assessments and valuations of structured credit securities firms by disregarding that there was no secondary market, that the negotiation is difficult and the absence of reliable prices for the benchmark bonds of complications not anticipated normal katastaseis.To impressive is that the increasing demand for such bonds was based on excessive daneismo.Gia example borrowed in Japanese yen at little cost and then guided the capital investment in high-risk seeking 6plasies returns. During 2004-2006 the Fed wanting to protect the American economy from an emerging inflationary pressures and the data had changed, with 17 upward movements increased the base rate of U.S. interest rate by 425 basis points to 5.25% in late June 2006. The increase in the cost of money has resulted in the bursting of the bubble ferengyotitas.Oi simple low loan borrowers could not repay their loans because the doses were increased by far their skills, commercial banks having to sell these loans had no due to anxious for their fate, investment banks, which have the tokomerismata loans issued by the proceeds from these loans did stop payments, investors were securitized bonds could see that they no longer any value, while the new titles not found a buyer and the whole system had lost credibility tou.I value of the property began to fall, auctions have multiplied, the property came to the ownership of banks increased, the seizures were a snowball, many borrowers saw the value of the property is less than the money daneisthikan order to obtain, so had no reason to continue the vicious cycle apoplironoun.O had already begun looking for olous.Oloi cash to meet their needs, sales of assets ( property, shares, bonds) lead to lower prices and the bankruptcy was the natural consequence. Another bubble had burst with enormous implications for the whole world of buyers and toxic bonds were everywhere. Another incident took profit end, but the seeds for the next Fed pesei.I already faced the consequences had been the crisis in U.S. mortgage loans for the whole world started to reduce interest rates, as did other physical and strong central yfiliou.Afti banks made record time after 10 moves downward from September 2007 until October 2008 reduced the rate of the dollar from levels of 5.25% to zero for the first time in U.S. history.