Even if the official beginning of the financial recession is considered 15 September 2008, the day when Lehman Brothers declared bankruptcy, the visionary analysts were able to foresee this event even since 2007, when investors started to lose their trust in the “secured mortgage” instrument, which allowed fabulous incomes for lenders with immense risks. At the same time, the success of the American Payday Loans on the market allowed access to easy but expensive money, increasing the debt rate for the average American family.
After 2007, the stock markets continued to grow, but with smaller rates. Lehman Brothers was only the tip of the iceberg in the domino of bankruptcies, as several other smaller players on the lending market were already in the process of financial execution.
The vulnerability of this system was provoked by the complicated financial operations, with leverage and margins, and by an expansive monetary politic of the US government. Until 2007, we can talk about cheap money. However, this concept is relative, especially considering that a large part of “cheap money” is used to give cash advances payday loans.
Besides the USA market, the wave of shock was felt in the entire world. The USA Administration issued the Fair Minimum Wage Act in 2007, which increased the average USA salary. However, this change was not founded on real financial resources. In order to pay the new wages, the employers had to fire the weaker employees, and this leaded to high unemployment.
The same thing happened in the EU states, which small exceptions, such as Sweden. This is one of the six EU countries that don’t impose a minimum wage, which says something about the usefulness of this method.
The Current State of the US Economy
The petroleum, IT, and financial companies are growing…again. Even if those companies were the reason for which we got into crisis the first time, it seems like companies from those same industries managed to get over the recession easily. Well, we can except the IT companies, but those also profited from the recession, especially because of the general tendency of externalization.
The banks were ravaged by the 2008 recession, but those that had immense profits before the recession resisted. The “internal cleaning” that took place in major US banks brought many individual brokers on the streets. Once the salary costs were optimized, the remained employers started to make millions for banks again. The main products used today are the unsecured personal loans, and the short term personal loans, but there are other successful instruments used by banks.
Many banks reduced expenses and invested with the purpose of having bigger businesses. It is normal to look for recovery, and then for profit. This is why the short term personal loans don’t look like the best idea.
Even if banks are looking to offer secured loans, the unsecured personal loans are still the most popular amongst clients. As for long term personal loans, it is hard for banks to approve those without warranties.
As long as the banks don’t offer long term personal loans with ease, independent financial institution with non-banking statute exploited this niche of clients. The interests are significantly bigger, but for some clients, this is the only option to obtain long term personal loans. Alternatives such as online crowd funding are also good, especially for people that use the internet to find long term personal loans.
Besides those companies, other non-financial corporations offer financing options for clients. Companies like Wallmart and Amazon have their own financing instruments for their clients. Those can be considered as long term personal loans, especially if clients buy objects with a big value.
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