The global economic meltdown

The global economic meltdown 

The news today is full of stories about the financial crisis and recession. The complex problems behind this crisis have given rise to a whole new vocabulary. So, today we are going to explore the language you have been hearing every day in the news. First, we will read a short article introducing the vocabulary then we will go over each word in detail with some example sentences to show how you can use the words.

Now, we will go through each word in detail with example sentences to show you how the vocabulary could be used.

Meltdown (financial meltdown, economic meltdown)

The term meltdown is used in economics to describe a severe and often sudden deterioration of financial institutions or assets, resulting in huge financial loss.

Example:

The financial meltdown in the United States is the worst economic crisis since the stock market crash of 1929.

GM experienced a meltdown in sales as rumors of their possible bankruptcy grew.

Recession

A recession is a period of economic decline. Economists usually define the recession as two or more consecutive quarters of negative economic growth.

Example:

Many people are blaming the increased unemployment rate on the current recession.

Credit crunch (also known as the credit squeeze or credit crisis).

The credit crunch describes the situation where banks reduce the availability of loans or credit to customers, as well as other banks, due to increased risk of not being repaid.

Example:

The credit crunch has moved the banks to tighten the conditions required to obtain a loan or line of credit.

Subprime mortgage

A mortgage is a loan for a house or property. Subprime refers to the poor credit rating of the borrower. So, a subprime mortgage is a housing loan given to people with poor credit histories.

Example:

Due to our low credit rating, we can only qualify for a subprime mortgage.

Securities

A security is a certificate of ownership for stocks, bonds, or other financial assets.

Example:

Stocks and bonds are two types of securities traded on the stock exchange.

Securitization

The term securitization refers to the process by which an institution, usually a bank, turns something into a security which is then assigned a value and traded.

Example:

The securitization of subprime mortgages helped start the credit crunch.

Collateralized debt obligations (CDO’s)

These are securities backed by a variety of fixed-income assets, usually packages of mortgages with different level of risk.

Example:

When the subprime crisis intensified, many mortgage-backed CDO’s became toxic.

Financial bailout

In everyday language to bail a person out means to help someone out of a difficult situation. A financial bailout is an act of giving financial assistance to a failing business to save it from collapse.

Example:

The US government has recently funded a huge bailout of the banking industry.

The US auto industry has recently been bailed out by the government.

Troubled-asset relief program (TARP) – also known as Wall Street Bailout Bill.

TARP was an attempt to strengthen the financial sector by buying toxic assets and equity or shares from major financial institutions.

Example:

The public has started questioning the benefits of TARP due to the massive cost and behavior of the banks.

Toxic assets/debt

Toxic means poisonous or harmful.  Toxic assets are high risk debts that are unlikely to be repaid to lenders.

Examples:

Toxic assets held by banks have severely affected their balance sheets.

Hope it was easy to understand the meaning of the words:)

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