One of the factors affecting the operation of the textile industry: the US financial crisis

One of the factors affecting the operation of the textile industry: the US financial crisis

Since the beginning of this year, the U.S. subprime mortgage crisis has gradually evolved into a financial tsunami, with financial turmoil and the threat of economic recession intensifying; domestic macroeconomic variables have increased, and policy adjustments to “maintain growth” have become a priority for the government MLA. Under this circumstance, the operation of my country’s textile industry has encountered unprecedented pressure. The international market demand has been seriously weak, and exports have become more difficult. The RMB has continued to appreciate, and the pressure has not been relieved. Production factors and labor costs have increased across the board. The effects of the country’s tight monetary policy have emerged. Financing problems intensified. This series of difficulties has caused a significant decline in profitability of my country’s textile industry and an increasing number of loss-making enterprises.

In order to allow readers to timely grasp the various factors that have a prominent impact on the development of the textile industry in the first three quarters, we have specially planned an “Analysis of Factors Affecting the Operation of the Textile Industry” “Special report, starting from the international economic environment and domestic macro environment for in-depth analysis. This issue first publishes the origin, development and impact of the US financial crisis on the development of my country’s textile industry.

In 2007, the U.S. financial industry introduced a new term to the world that the vast majority of ordinary residents had never heard of – the subprime mortgage crisis. In 2019, when people were still thinking about when the subprime mortgage crisis would end, the crisis had quietly escalated into a financial storm sweeping the United States and quickly began to spread. The five major investment banks that have dominated Wall Street for more than a century have gone bankrupt, reorganized or transformed. The financial industries of developed countries such as Europe, South Korea, Japan, and Australia are also trembling in this menacing storm, and quite a number of financial institutions are on the verge of collapse.

Memorial of the US Financial Crisis

The development process of the financial crisis

The improper macroeconomic guidance of the U.S. economy gave rise to subprime mortgages, paving the way for the crisis

Subprime mortgages in the United States are not a new term that only appeared in this century. After the Great Depression in the 1930s, the U.S. government used the real estate industry as the main driving force for economic growth for a long period of time. In order to stimulate consumer demand for real estate, the government has established specialized financial institutions to provide private housing mortgage loans to encourage residents to purchase houses. However, the purchasing power of residents is limited due to income constraints. Consumption of residents’ future income has become the main means to promote the prosperity of the U.S. real estate market and even the entire U.S. economy. As a result, subprime mortgages came into being. Subprime mortgages, also known as subprime mortgages, are a type of low-income loans issued by U.S. lending institutions (including loan companies, commercial banks, etc.) to people with low credit and no proof of fixed income.Quantity loan. It can be said that the creation and expansion of subprime mortgages itself is the product of the improper economic development orientation of the United States’ over-reliance on the real estate boom for economic growth.

The bursting of the IT bubble in the United States at the beginning of this century triggered the expansion of subprime mortgages and gave birth to a crisis.

At the beginning of this century, the economic bubble caused by excessive investment in the IT industry burst, and the U.S. economic growth slowed down across the board and entered recession. In order to restore the economy and stimulate consumer demand, the U.S. monetary policy has been significantly loosened. The Federal Reserve has cut interest rates 13 times in a row to encourage residents to consume credit ahead of schedule. The mortgage loan interest rate has been reduced from 8.1% to 3.8%, and the down payment for loans was once reduced from the standard 20% limit. With zero down payment, the reliability of loan credit evaluation is also significantly reduced. Under such circumstances, subprime mortgage issuance by U.S. lenders expanded rapidly. According to relevant data from the Federal Reserve, the proportion of subprime mortgages in all housing mortgage loans increased from the normal 5% to 20% in 2006. Credit risks in the US financial market have increased.

The speculative psychology of financial institutions has intensified, fueling the crisis.

After experiencing the economic downturn at the beginning of this century, American financial institutions are eager to pursue high returns on investment, and speculation is rising. Lenders in the United States ignored the credit risks of subprime loans, securitized them on a large scale, and marketed them deliberately ignoring the risks. After American investment banks obtained subprime mortgage bonds through underwriting, purchasing, etc., they then took advantage of the mature and lax regulatory conditions of the U.S. financial market to segment, package, and combine subprime mortgage bonds through financial engineering technology, and developed a large number of derivative financial products. Promote it to insurance companies, hedge funds and other financial institutions through sales, mortgages, etc. The original loan amount of one yuan at the beginning may have been enlarged to a financial product of more than ten yuan after entering the final stage, which greatly increases the investment risk in the financial market.

Excess liquidity and tightening of monetary policy ignited the crisis.

After years of prosperity in the real estate and financial industries, the U.S. economy has gradually returned to growth. Monetary liquidity has developed from tightening at the beginning of this century to excess, and interest rate policies have begun to bottom out and reverse. Around 2005, the Federal Reserve began to raise interest rates continuously, and loan interest rates and deposit reserve ratios continued to adjust. The sharp tightening of monetary policy has caused the U.S. real estate market to cool down rapidly, housing prices have fallen, and the market outlook is pessimistic. At the same time, the loan repayment burden of residents who took out loans to purchase houses has rapidly increased, and many residents have stopped repaying their loans. Naturally, subprime loans with low credit ratings have borne the brunt, and default rates have increased significantly. The default frenzy triggered an asset crisis for lending institutions. U.S. lending institutions represented by Freddie Mac, Fannie Mae, New Century, and Washington Mutual were in trouble, and the subprime mortgage crisis broke out.

A chain reaction, the crisis escalates.

After the subprime mortgage crisis broke out, all subprime mortgage bonds and financial derivatives lost their foundation. A large number of subprime mortgage bonds and derivatives held by investment banks, insurance companies, hedge funds and other financial institutions have been converted into non-performing assets. Many institutions are on the verge of bankruptcy due to excessive non-performing assets. Representatives of the five major investment banks and American International Group Financial institutions went bankrupt, reorganized or transformed one after another, and the subprime mortgage crisis escalated into a comprehensive financial crisis in the United States.

In the context of economicization, the financial markets of countries with higher levels of economic development are highly integrated. Financial institutions in many countries hold subprime mortgage bonds, subprime debt derivatives purchased in the U.S. market, and investments in U.S. failures. Normal financial products and equity issued by banks, insurance companies and other financial institutions are also facing the dilemma of increasing non-performing assets and shrinking funds to varying degrees. Countries such as the United Kingdom, France, Germany, and Belgium have seen residents run on banks, and financial institutions in Japan, South Korea, and other countries have also closed down.

Disclaimer:

Disclaimer: Some of the texts, pictures, audios, and videos of some articles published on this site are from the Internet and do not represent the views of this site. The copyrights belong to the original authors. If you find that the information reproduced on this website infringes upon your rights, please contact us and we will change or delete it as soon as possible.

AA