Recent Economic Crises

I like Mrunal Patel's style of explanation - simple and no strings attached.So,in the following paragraphs I will present from his writings,with minimum handiwork by me.
If you have jargon-fright ,then this is just tailored for you.
He has intentionally skipped technical details.

Difference between Eurozone crisis and Subprime Crisis?
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First you need to understand Mortgage, derivatives and Asset bubble.
Mortage :

You give me $10,000 loan and I sign on a paper that if I can't pay back the amount before 2045, you can take away my house. So my house is 'mortgaged' to you.

Subprime dude :

He is the borrower who is less likely to repay a loan,because his income is low or irregular.

Why would bank want to give loans to sub-prime dudes in the first place?

Bank can demand more interest rates from such people because of their bad credit history. Subprime lending can also mean the car-loans, credit cards etc that banks sell. Besides when the general manager gives 'impossible targets' to his probationary officer,what can a man do? Just give out loans to every swinging dude around.

Derivative:

You’re a big bank, you've given such loans or credit cards to lot of sub-prime dudes and you know well that they're less likely to pay you back. So after a while, you decide to cash in your investment before these dudes start defaulting, so you repack those mortgage papers and make a new paper - 'security paper' -which basically says “to anyone who gives me $50,000, I’ll give mortgage papers of 5 houses”,this is derivative product, because this security paper derives its value from those mortgage papers.

Asset bubble :

So now you sold such a derivate product to a second guy, he then re-packs it with other things and makes a new derivative product sells it to a third guy...thus the chain continues. Here, no new asset (property or something that can generate money) is created, basically all of you are playing games with the same five houses mortgaged, blowing the balloon with even newer derivates. Thus the asset bubble is created.
A point comes when people who took loans or did big shopping with credit cards refuse to pay back and say 'take our houses, we don't have the money'.
Now with so many people refusing to pay ,there are too many houses to sell.
Remember supply and demand determine market prices?So house prices hit a low.
Now you can't sell the house, real-estate has collapsed, no one is ready to pay even $5000 for that house, on which you had given $10000 as loan. Your asset bubble is burst, and what you've in your hand: that piece of trash paper is a 'toxic asset' or a 'non-performing asset' (NPA). This is sub-prime crisis. And technically it was contained, after American treasury bought all such NPAs worth $1 trillion (somewhere in 2009), but the aftershocks are still felt.American economy is not back on track yet, because that $1 trillion bailout money didnot fall from sky, nor do the dollars spend on military expenditure in Iraq or Afghanistan fall from sky.

Eurozone Crisis :
Also known as Sovereign debt crisis.In the Eurozone, Governments of PIGS (Portugal, Ireland, Greece, Spain) were spending way too much money on subsidies,handouts to the economically struggling (like our Indian NREGA stuff )and bank bailouts etc. They used to finance their spending by borrowing from the market.
These nations earn most of their money from export to America and tourism income from American travelers. But the sub-prime crisis and the recession in 2008-09 meant Americans lost income,jobs,houses and naturally many stopped going on vacations or buying imported items. So the airlines,tourism and export business declined, while the expenditure remained the same. Hence in a way, Eurozone crisis is an aftershock of the Sub-prime earthquake.

Little concepts:

debt to GDP (ratio) :
Suppose Debt to GDP is 96% this means if the country produced goods and services worth $100 in a year, they already had outstanding loan-repayment worth $96.
High Debt to GDP means investors lose confidence in your country.These PIGS had high Debt to GDP than other nations, hence they are in the crisis.

But why only PIGS: why they ran out of money? (along with Debt to GDP %)

Portugal:93%
Over-spending by Government, inefficient Public Sector Units with too much manpower (just like our Air-India).

Ireland:96%
Their banks were running the same asset bubble game like the Americans. When it collapsed, Government had to bail'em out.

Greece:143%
Overspending on Social schemes, overinflated staff in Public Sector Units. Misreported its official economic statistics, to fool the investors in buying the Government bonds. Later Caught.

Spain:60%
Socialist Government, so lot subsidy and social-security and assistance to its poor and unemployed (like our NREGA stuff).

Italy too may join the club with 116 %

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