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Meaning of sub-prime mortgage crisis

The term “Sub-prime Mortgage Crisis” refers to the current financial crisis which was primarily triggered by increasing delinquencies and foreclosures in mortgage loans in US and hence affecting major banks and financial markets around the globe adversely.

The last time the world faced such a situation was after the stock market crash in October 1929. It took three years to launch efforts to counter the recession that engulfed after the crash resulting in collapse of majority of banks, deflation, unemployment, slump in economy etc.

Just like the previous recession, economic factors like inflation, rising commodity prices, housing bubble along with globalization and innovation in financial markets were seen independently and never in tandem, hence never feeling that recession has set in, until it was too late.

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