The economic crisis was caused by a lack of financial regulation by the Republican Government of The USA. A sub-prime mortgage is a US invention. It's called SUB prime because it was a loan contract given to people with low incomes and started at at a repayable monthly rate but after a set time the monthly rate rose to an unaffordable level. When this happened the expectation from the lenders was that people would sell their house and repay the loan. This was popular with the lenders because the initial rate was much higher than normal and they made more money. These mortgages were then bundled and sold to Hedge Funds who onsold them to the public as real estate trusts. These trusts are what has collapsed.
When this happened banks were not prepared to lend money as they could not be sure of the value of the asset they were lending on and so a credit crisis ensued. (This is a simplification of a very complex matter)
The Mortgage brokers selling mortgages to the homeowners were offered higher than usual commission for selling subprime mortgages so they persuaded borrowers who might have qualified for prime mortgage rates to take subprime mortgages. These brokers operated in a completely unregulated market.

Although this originated in US because of globalisation, a huge amount of overseas money was placed in the hedge funds property trusts that eventually collapsed.

Australia is in a very good position in all of this as our banks are very profitable having very little exposure to the toxic subprime market and our interest rate was at a reasonable level allowing the Reserve Bank to lower rates immediatley by 1%
which gave consumers a bit of extra spending power. Also our Government has been running at a surplus for the last few years and has funds available to put back into the community.

To encourage the housing market the Government is doubling the first home owners grant from $7,000 to $14,000. This grant is given to anyone buying their first home and is designed to help young families enter the housing market.
The Government has also decided to to guarantee the $1.2 trillion held in deposit accounts as well as bank borrowings. This prompted the best economic news in weeks, the sharemarket posting its biggest one-day gain in more than 10 years yesterday, as investors poured back into bank shares. The Australian Government's decision to guarantee bank borrowings - to "unclog the arteries of the global financial system" - provided relief in the wholesale money markets where banks source some of their funds.
The Government is also planning to give early Christmas presents for pensioners, families and low-income earners by giving some sort of "one off" payment. This is being given to low income earners as they usually spend rather than save and this money will help to boost small business.

This is an example of how an efficient, transparent Government operates. It has no foreign debt, runs a budget surplus and is then able to spend money that it actually has instead of borrowing when things go bad. Australia is also able to operate a fair and equitable social welfare system that allows for financially disadvantaged people to live with dignity.

This makes me want to migrate to Australia.

Where is the money going: points to note--

a) $7,000 First Home Owners Grant until June next year, or $21,000 for first home buyers purchasing newly constructed homes

b)Low and middle income families will receive a Christmas bonus of $1000 per child, single pensioners will get a $1400 payment and pensioner couples will be given $2100, carers get $1000 per person they care for

d)$187 million to create 56,000 new training places in 2008-09

E) Bank deposits (worth $1.2 trillion) have been guaranteed

--Course there are flaws in the plan...but in these tough times its the golden goose...and remember, all this money is coming from the budget surplus