1/12/2024 0 Comments Vicious circle mcThis, in turn, lowers housing values further from over-supply, reinforcing the cycle. This provides an incentive to walk away from the home, increasing defaults and foreclosures. As housing prices decline, more homeowners go " underwater", when the market value of a home drops below that of the mortgage on it. A specific example is the circle related to housing. The contemporary subprime mortgage crisis is a complex group of vicious circles, both in its genesis and in its manifold outcomes, most notably the late 2000s recession. When the results are not detrimental but beneficial, the term virtuous cycle is used instead.Įxamples Vicious circles in the subprime mortgage crisis įurther information: Subprime mortgage crisis Vicious cycles in the subprime mortgage crisis A well-known example of a vicious circle in economics is hyperinflation. A vicious circle will continue in the direction of its momentum until an external factor intervenes to break the cycle. Each iteration of the cycle reinforces the previous one, in an example of positive feedback. It is a system with no tendency toward equilibrium ( social, economic, ecological, etc.), at least in the short run. JSTOR ( March 2012) ( Learn how and when to remove this template message)Ī vicious circle (or cycle) is a complex chain of events that reinforces itself through a feedback loop, with detrimental results.Unsourced material may be challenged and removed. Please help improve this article by adding citations to reliable sources. This article needs additional citations for verification.
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