Summary: The Crisis of Credit

The video Crisis of Credit explains how the credit system works as well as causes for credit crisis.

Firstly presented are definition of credit crisis and the involvement of the key economy terms. The fact that we are all affected by this situation makes us wonder, how?! Basically the concept is two groups of people homeowners and investors, the only mutual thing between these groups are the mortgages-houses, the money- insurance companies and a lot of banks and brokers. This is how this system works. The homeowners want a house; mortgage broker connects them with the lender, who gives them a mortgage. Next thing, investment banker buys the mortgage, and thousands more, so he gets income every month. CDO box, or collateralized debt obligation is key part, as the safe part, is bought by investors, who are then directly connected to the mortgages.

The problem arises when financially unstable families can't repay the credit.
Monthly payments turn into houses, and the demand for them is low. Furthermore, even the homeowners start selling their houses. This leads to so called System Frizzing, which leads to bankrupt, and millions of worthless investments.

That is how the Crisis of Credit is created.