The origin of the sub-prime crisis that is shaking up global financial markets can be traced to the end of the tech boom in 2000.

An Investor Guide to the Sub-prime Crisis

To jolt the US economy out of a recession in 2001, the US central bank slashed interest rates and sparked a borrowing frenzy. Because Stock markets were struggling, people bought property instead.

Everyone saw there was money to make out of the housing boom. Home lenders lowered their standards to lend the vast amounts of money that investment banks on Wall Street had raised by selling sophisticated debt instruments. This paper attempts to explain how the crisis developed, how it has affected inancial markets and what it means for investors.

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This article has kindly been supplied by Fidelity International Investments.

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