What is the cause of the rapid appreciation of the yen and the simultaneous weakening of the world over the world, what is the "subprime problem"?

Temporarily the yen becomes 113 yen and the tremendous yen appreciation, and it is showing the aspect of the simultaneous stock downs all over the world, one of the causes is "Subprime problemHe is what he says.

Despite being sporadically mentioned on the television, there is not much explanation as to what it is so far so we tried summarizing so that even people who do not know about stocks or such are able to understand to a certain extent.
Well, first of all it is a major principle. The side where the excess is already willing to lend money to those who have creditworthiness and who will repay the money properly. Because the amount lent is properly returned and interest is paid properly. Since the risk is low, even if the interest is low, there is no problem. Such a layer with credibility is "PrimeIt is called. On the other hand, "sub" of "subprime" is used in the sense of "next", in short, it means that the opponent whose level of credibility is one level lower than such a good opponent.

In short, subprime is to lend money to those who can not borrow money. It is a form close to so-called rental lending. What kind of person borrows is very easy to imagine when reading the following term explanation.

What is sub-prime - Hatena diary

· 2 or more delinquent loan repayments within 30 days within the past 12 months or 1 or more past due within 60 days within the past 24 months
· There have been statutory judgment, seizure of mortgage, collateral recovery, nonpayment of loans during the past 24 months
· There is self-insolvency in the past 5 years
· The risk score of the credit bureau is below the predetermined value.

Lending conditions are also amazing. It is almost unconditional.

Subprime loan problem, "both prediction and prevention were possible" rice paper commentary: Garbagenews.com

In setting subprime loans, it is a phrase that does not require proof of income to borrowers (that is, they do not consider income), and whether they are engaged in work or whether they have assets or not, He said that he set a loan. In essence, it is the arrangement that the borrower places the collateral itself as collateral and can borrow money, although the borrower does not originally have collateral or promise of future promises

Why do you lend money to such a low-credit layer, that is, to those with a high probability of default for which repayment can not be completed even if you lend it?

FujiSankei Business i. Lecture / Subprime loan

Subprime loan is a kind of consumer finance for people with low incomes and low creditworthiness, lending them with high interest rates of 20 to 30% per annum as collateral for automobiles and houses. Approximately 40% of total households in the United States are said to be subject to subprime, with an annual income of less than 25,000 dollars, and the market is quite large.

In other words, it has a low popularity, but because it has a large population, it is established. When saying "sub prime problem" in television, newspaper, etc., it is common that it means this residential loan.

And, of course, if you lend money to the subprime tier, the interest rate will be high. This is because the subprime layer has already failed, or if there is a scratch when looking at the history of such money, such as delayed repayment. In other words, the creditworthiness is low. However, the reason why I still lent money to this subprime mortgage is simple because the house I bought with the loaned money is collateralized. Even if we can not repay even if we refinance the loan (refinance to redeem the loan) etc., finally we can collect the loaned money if we sold the house. Because the US housing market has been on the rise all the time. As a result, we were able to develop subprime loans for housing with confidence. Rather, as the price of houses rises and real estate prices are rising, credit of the subprime tier that can be lent with high interest is "Go upThat's it. Although it is a strange story, as a reason, "Even if I can not repay the money I can let the house sell"about it……. Naturally the house is gone, but the lender is irrelevant if even money can be earned. Moreover, this logic always makes a profit, in short, the risk is low. Moreover, as I mentioned earlier, the subprime layer has a large population so we can lend money one after another. It is a matter of course that it will be said that you will make money as you make money by letting the subprime layer loan you.

As the economy is good, real estate prices are rising steadily

Even if you can not repay it with a subprime loan you will profit if you sell a house that is collateralized

I will lend the money to the subprime layer as a subprime mortgage further

As we lend to the subprime loan, the profit is so profitable that it lends more and more, the standard becomes looser more and more (we will lend to the subprime tier with lower creditworthiness)

Gold residue is generated. Below, infinite loop.

Structurally, the fundamental structure is to lend money to the person who raises the money surplus to a person who can not possess land or home, to gain profit. I also feel like a kind of poor business, but it is much more malignant. For, rich are rich, and those who become poor become increasingly poor. This leads to the fact that the economy itself is atrophied, so it always has a negative effect. It is no mistake if you interpret it as the time when the influence has just begun to be revealed.

Here is the main theme. Why is this leading to a weaker stock market in the US market and a global stock weaker, and will it lead to a stronger yen?

Although the problem is still simple as far as we have done, we have made this subprime loan "bondable" to further enhance liquidity. This was a killer.

"Subprime" that is submerged in many funds: before bankruptcy, grace of subprime is three months / SAFETY JAPAN [Mr. Kenichi Ohmae] / Nikkei Business Publications, Inc.

While these people 's faces are visible, they bundle thousands and tens of thousands of loans, from which they make small - bond bonds like REITs. It is a type of so-called ABS (asset backing security: asset-backed securities). For example, if a borrower of a loan pays 12% interest, it will add it to the bad debt, collection and administrative expenses, add 4% of surplus and sell it as a product with a yield of 8%. At this point, people who collect this bond and those who buy this bond are completely separated. So-called funds and the like jump into these products from operational difficulties and incorporate them without knowing it.

It was a question as to where this small bond went, and eventually it came to be handled by hedge funds. If you are in a bubble situation that property prices continue to rise, investing in CDOs (secured collateralized debt obligations) securitized this subprime loan receivable etc. will be able to make money with a very high yield Is not it?

And the subprime problem will rise. That is, investment failure.

It is incorrect that it assumes price rise in the first place rising up in the first place. It is impossible for real estate prices to rise forever. This is clear when you look at the time of Japan's land bubble. Not only that, but also lent money to the subprime mortgage that should not be lent, it is natural that repayment will be delayed and will fail. As a result how much did it burn? It is obvious if you look at the amount.

The grace is only three months: Before the collapse, the grace period of the subprime is three months / SAFETY JAPAN [Mr. Kenichi Ohmae] / Nikkei Business Publications, Inc.

How serious is the subprime problem? How will it affect the world market after this? Also, how much money have you lent to those who can not lend?

The total amount of subprime mortgage is said to be between 170 trillion and 180 trillion yen in Japanese yen, and 30 trillion yen is said that the repayment is delayed. Indeed it's calculated that 16 percent is burning.

When you start to scorch, the profits that were supposed to originally come out will not come out. Because, if you get burned in such a large amount, it will result in a large number of houses taken up as collateral. If so, it will be sold on the market. It was over supply. Then, it gets stuck all the way.

Subprime layer that can not repay subprime loans appears in large quantity

Housing picked up as collateral increases to the market at a stretch

Housing supply becomes excessive, housing prices go down

Even though loan repayment was not completed, it was supposed to be profitable if you sold a house, but it turned out not to be profitable

Well ... ... This subprime loan is "bondable". In other words, it is not a bank but a hedge fund etc. for investment purposes. I will not profit anymore just by having it. Although I have to sell, since there is no value for a claim that is not profitable, no one will buy it. The subprime mortgage loan was noticeable to no one by this extreme. Who will really bother to buy things once the problem becomes obvious? Nobody will buy it. The problems of depletion of liquidity at hand and surface appearance of loss occur.

And here is the beginning of the worst chain. Hedge funds borrow their working capital from banks, investors, etc. It is necessary to repay these funds, and securing funds is essential if you are managing funds. Banks rush to recover funds to reduce risk. For this reason, hedge funds need to repay funds to banks with securing short-term profits, so we will try to obtain profits for the time being by selling holdings one after another. Even so, hedge funds that can not fill the hole appear one after another, and there are also cases where liquidation or being forced to go out of business. When these things are exposed and reported, the market will be more vigilant, so liquidity of funds will be reduced further. Credit declines, everyone is alarmed, so money will not move easily. Moreover, everyone is going to rush to try to fix the profit or to manage to minimize the loss, this is the subprime problem.

It was profitable with subprime mortgage loan

Prices of houses declined due to excess supply, and the economy also began to stagnate

A hedge fund that was managed by relying on subprime mortgage loans failed

Banks and investors hurriedly start collecting funds

Hedge funds desperately try to make other profits for filling subprime loan claims

Hedge funds that can not be filled are collapsed, liquidated, closed

Reliability rapidly deteriorates for fund management that may include subprime loan receivables

The movement of money, that is, liquidity declines. Spill over the whole world.

Then, of course, stocks will move greatly in stock markets, so the stock down will proceed as a result and since the funds in the world are not the only ones that have this subprime loan bond, It all suffers an effect. If this happens, the move will be bigger against the US dollar, which inevitably will result in the appreciation of the yen. It also sharply. If you do not do that, the holes will grow bigger and so the hedge funds around the world are now desperately trying. That is the cause of price movements in the past few days.

The reason that this is expected to further accelerate and become more serious is that this burning is not "loan" or "loan" between companies, companies, corporations, but "individuals". As already explained, the loan of the subprime problem is a mortgage, and the one borrowing is "individual". It is "individual" to repay. As stated in the above cited case that this is non-repayable, 16% already burned in, the early story is "The economy of the United States itself is becoming messed up in a fundamental placeIt is a sign of failure. Various things will happen without pretending to reduce the risk that is expected to happen. Influence has also been spreading to Japanese banks, which has led to the following consequences, which is a factor in domestic stock price declines.

FujiSankei Business i. Comprehensive / subprime crisis world simultaneous equity savings surplus, forgotten risk

Also in Japan, Aozora Bank announced on October 10 that a valuation loss of 4.48 billion yen occurred in the April - June quarter of 2007 related to subprime. Nomura Holdings already has a loss of about 72 billion yen in the January-June period and Shinsei Bank also lost 3.4 billion yen in the same period, the influence is gradually spreading.

If this happens, a state of credit crunch will occur, and funds will not be directed to the place where funds should be headed if originally. In the case of housing, the lending standards are already being tightened in the US, and as a result, it is becoming difficult to borrow the layer that you could borrow without problems. In other words, the subprime problem is not limited to the problem of hedge funds. People who are not only stocks tend to focus on hedge funds or just about their own, and tend to take the view that "risks are dispersed all over the world because subprime loans are securitized, so there is little impact" , In fact it is that we should not overlook the fundamental problem of "why did this happen? What is going on?"

Already the slowdown in personal consumption is gradually becoming apparent as the number of housing starts in the US last month has been decreasing for the first time in ten years. It is safe for those who thought that it was just a little panic in the market, that is, the situation that market anxiety psychology spreads because the whole picture is not yet grasped at this time. When the current US economic real economy becomes clear, attention is needed in the future as to what will happen.

in Column, Posted by darkhorse