Investors



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Illustration by: Brittany Cornum
   The goal of this website is to give insight from an investors point of view as to how the recent Great Recession came to be, and some of the effects it had on the global economy and investors themselves. The Great Recession was caused by a great number of things, but again this is a site intended to address and focus on the view point of investors. That being said, the first two pages are aimed at informing readers about issues concerning Credit Rating Agencies and Foreign Investors (particularly China), both of which were instrumental in creating the recession. The rating agencies contributed to this "perfect storm" by continuously over-valuing securities that were a conglomerate of bad Mortgage Backed Securities and many other types of securities they didn't know the true value of. The agencies became trapped with a conflict of interest because they are paid by the very firms that they generate ratings for. While these agenceis were consistently adding false value to the market, it was only time before foreign investors would be tricked as well. 
   These investors all around the world became extremely interested in these randomly constructed securities and U.S. debt. China took on a mass amount of the U.S. debt, which allowed interest rates to remain low and gave lenders more money to lend to lots of very unqualified borrowers. These over-valued securities lead to overconfident investors which in the end lead to the burst of the Housing Bubble. After the bubble burst (or housing market collapse) widespread contagion spread through the U.S. economy which lead to a Credit Crunch and a Flight to U.S. Treasuries. These results occured because of fearful investors and lenders wanting to hold on to their money and IF they were to invest, only make investments that were as safe as they could possibly be. Borrowers and lenders becoming reluctant to look for more investments to make put a strain on our financial system, because these complimenting actions caused there to be little to no credit available and a lack of liquidity in the markets. With that in mind, it becomes clear investors faced lots of unexpected systemic risk and looked to reduce this risk by finding the safest investments possible to add to their portfolios, and those were U.S. Treasury bonds. The reason they are so safe is the fact that the U.S. has never defaulted on their debt and these bonds are typically used as an evaluating tool for the rest of the world because so. To learn more and for more in depth information about each topic please look at the rest of the pages on this site, and thank you for visiting.