The restriction on credit, higher oil prices and strong adjustment in the construction sector have led to the current economic crisis, with serious economic slowdown, inflation and alarming growth of unemployment.

The U.S. economic crisis had its origins in subprime mortgages, which are those that were granted to customers with poor credit or with little guarantee that they could afford to pay their dues. In a globalized world we live in, the subprime virus born in the U.S. and its consequences have found the perfect way to get create a serious infection of the entire global financial system. The banks that promoted subprime mortgages, they needed more money to continue offering this kind of mortgage loans. To this end, introducing structured products sold to other financial institutions and thus obtained new liquidity with which they could continue with their activities and giving new subprime mortgages. The subprime virus has gotten sick the global financial system and cause an international economic crisis of catastrophic consequences.

As discussed, these mortgages in a globalized world, proved unable to financial institutions around the world. The banks lend money to each other in the so-called interbank market and banks have come to have a deep mistrust between them, because they think of each other, which can be infected by subprime mortgages. Crashes and the circulation of money. The money does not flow and this leads to a weakened economy, because if the banks have no liquidity, can not give, or families, or businesses, the appropriations necessary to carry out their projects.

The Spanish economy, as European countries, also suffers from the dramatic situation of economic and financial crisis. Spain has suffered a series of impacts that have seriously damaged its economy and succeeded in converting a high GDP, low growth, going from a good few years to reduce unemployment, increased concern about this, and a low and stable inflation bordering on a known price stability , (as desired by the European Central Bank (ECB), and defined as an annual rate of price change close to but below 2%) to inflation overwhelmed and exceeded 5%; September but closed at 4.5% by the fall in oil and in October stood at 3.6%. In the following months continued a downward path and soon it went from high inflation to come on the scene the ghost of deflation. Deflation is a widespread and persistent fall in prices. Although it has been a deflation technique for joining two consecutive quarters (the first two of 2009) of a negative inflation, no one can speak of actual deflation, but is the result of skyrocketing oil prices that reached in a short time in the summer of 2008, to continue later with the same dramatic falls. After months of high inflation and rapidly falling back to the same inflation recover reasonable values. The factors that have impacted heavily on the economy are:

The credit squeeze : There is no facility for banks to lend. is installed interbank mistrust, banks are wary of each other and do not lend money. The banks think of each other: “Your building is imposing, but inside, would not be infected by the subprime mortgage virus?”. There is a lack of liquidity. The money does not flow with the normal required. The demands gums to get a loan increase. The U.S. housing crisis caused by subprime mortgages has led to serious caution to the entire financial system and at the time of granting credits. This is clearly detrimental to businesses, as funding is a widely used business resource for growth and development. Citizens are not easily in big banks to finance their purchases, such as housing and vehicles, which disturbs the auto industry and real estate. When two areas of great importance, problems moving large numbers of firms of different characteristics that relate directly or indirectly with them. For example, a company working with wood to make doors for homes, easily suffer the problems of the construction sector. The lack of liquidity in the financial system from getting to the money to citizens, thereby lowering consumption, generate less profit companies are forced to cut their workforce and create more unemployment.

Many companies are dependent on bank credit, without which projects could not, can not implement their investment. The lack of liquidity in the interbank banking crisis is problematic, and even then the financial institutions regain liquidity, thanks to extraordinary measures implemented by the monetary authorities (eg liquidity injections) or governments (eg purchase assets), the conditions for granting credit, increase. Banks do not want to take excessive risks to a very difficult economic situation. They are also under the guarantees given by companies to financial institutions. In times of prosperity and economic growth, the bank can understand that many business projects are viable and potentially successful, but those same projects, given the severity of the current economic crisis, can now be defined as the opposite. It’s a terrible vicious circle generated by the credit crunch. Financial institutions do not grant credit to businesses and families about the difficult economic situation, but no credits, feeds the problem and manages to increase the severity of the crisis.

Climbing on oil: Oil reached in July 2008, the historical record by exceeding $ 147. Then he started back and is now ranging between 70 and 80 dollars. The continuous oil price increases, severe active proc these inflationary and can seriously affect the economy. If oil price rises, it causes all a spiral of rising prices. For example, if the truck that carries food to supermarket spends more on transport, food price rise and consumers will increasingly have less money to buy the same things and reduce costs.

Oil after reaching record on their credit, major star began to decline. You are now near $ 70 a barrel. That oil has come down is good news for families and businesses since the first have more disposable income to spend on consumption, since they spend less money on fuel and electricity bills. This favors the revival of the economy. The companies have a lower energy cost and therefore can be more competitive and lower prices, and its products more appealing to consumers. It is also true that the behavior of oil is still very volatile, in these times of great financial turmoil, so it contributes little to increase the stability and the confidence that companies should have to grow, invest in them and create jobs. Furthermore, as regards consumers, it’s time to refuel their vehicles, they realize that the speed with which oil prices climbing became immediately increase at the pump is not the same as when it happens otherwise. The oil price declines, the consumer will come very slowly and not so faithful.

Set construction: The construction was the engine of the economy and the generator of employment. Furthermore forcefully fed to the bank. The engine has stopped working. Then comes the economic downturn, the crisis and high unemployment. Month to month unemployment rate increases, especially in the construction sector. There was an oversupply of homes on demand, this leads to a necessary correction. The rope was tightening too much and too many boundaries were crossed. With an oversupply, a sharp increase in house prices and interest rate hikes, which helped to significantly grow the interests of the mortgage loans, they got the call form “housing bubble”. A bubble that everyone saw, but while everything worked and generated great fortunes, did not have too much importance. But the bubble burst and now it’s time to pick up the consequences and aware that there are limits that it is better never to cross. The setting of the construction sector is still strong and intense. The positive extraction can draw from this correction is that if you are being so serious, and can theoretically be completed before start before the road to recovery.

The bursting of the housing bubble began to be very threatening when many agencies were beginning to point out that was stretching too much time was needed to sell a home. The housing supply was growing at a breathtaking pace, prices are continually prices soared and interest rates reached record highs. Too dangerous combination that very strongly tempted to big bang and nothing was done about it. And finally arrived. But it was not worse. The real problem was that with the bursting of the housing bubble, serious in itself, the subprime virus originating in the United States had already contaminated the whole interbank system. Liquidity is no longer flowing through financial institutions. The lack of fluency in the banking system led inexorably to the credit crunch. The bursting of the housing bubble has combined with a credit squeeze and the result of this explosive cocktail has been a major crisis with devastating consequences. If the real estate bubble burst would have occurred without alteration of the banks, the consequences of crisis would have been very nearly as virulent as they have been.

The poor economic situation has a direct impact on citizens and businesses. Consumers detect it, live it directly, can they or family members lose their jobs. The media detailing all aspects and circumstances of the crisis and families and businesses know the details of all the bad economic data that occur continuously. It creates distrust among consumers . Citizens reduce their consumption for fear of possible worsening of economic situation and their own. The lower consumption of citizens caused by mistrust has a direct detrimental impact on business and economic growth, further aggravating the crisis. The entrepreneurs also feel distrust and surely paralyze business projects that could generate employment for fear that they will fail before the crisis, or perhaps the deferred waiting to come in the future more favorable winds. Why they always say that confidence is very necessary to generate employment.

The above circumstances have been instrumental in reaching the present situation of economic and financial crisis. It is also necessary to take into account that the causes of the crisis are converted to time in effect and vice versa. For example, unemployment generates economic downturn, as families losing their jobs, have to reduce their costs. As consumption is reduced by citizens, firms have lower profits and are forced to downsize. Vicious form of it was difficult to leave. Something has to break the negative to help the vicious circle becomes a virtuoso.

A good economic data would influence others, dragging them to a better performance or a change in trend and gradually help change the economic scenario. It may be the case of falling oil prices, it leads to lower inflation as households and firms have lower costs. In this way the families have more room to allocate income to consumption, and businesses to become more competitive and lower prices. They are also very significant cuts in interest rates by central banks. The U.S. Federal Reserve (Fed) has lowered interest rates to between 0 and 0.25%, the Bank of England (BoE) to 0.5% and the European Central Bank (BOE) , following a policy of cuts to address the crisis and recession in the eurozone, has placed in 1%.

The economic crisis is so severe and internationally . Different countries have launched numerous incentive plans and mobilized significant amounts of money to try to mitigate the serious effects of the crisis. Public accounts of the various States are deteriorating at a rapid pace and increase of public deficits forcefully. The intensive economies slow, reducing tax revenues. Furthermore, the increase in unemployment, implies an increase in benefits. If economic activity falls, lower tax revenues, if unemployment increases, increase benefits, and if it is put in place numerous incentive plans to address the crisis, it inevitable a dramatic increase in public deficits in the different States. A second phase of the economic crisis comes as a result of the sharp deterioration of public accounts. The investors and financial speculators punish those countries that show solvency problems, high high debt or deficit. Rise in interest which these countries can refinance their debt, thereby worsening their financial problems. In this second phase of the crisis, different states put in place severe adjustment plans public. The austerity is needed. States should be, and appear as possible before the markets solvents.

Monetary authorities and governments around the world have implemented various plans and various structural reforms to make their economies more competitive and effective stimulus crowd and setting plans to reduce high budget deficits. The objective is to count on credit and as soon as possible to generate economic growth. All measures, reforms, and incentive plans are in place setting and are aligned to face and overcome a severe economic crisis, difficult, complex, and to which have found no clear protocols for action. Some countries are already showing signs of recovery. We’ll have to wait and hope to consolidate it.

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