I am a FH squatter
- Dec 23, 2003
Sub-prime was just the straw that broke the camel's back. The problem was SYSTEMIC levels of debt and companies with business plans that could only work if levels of debt kept increasing. The biggest profit-making banks in the west were run like pyramid schemes. Did you see the programme on how RBS was run the other month ?Actually, it started in America, under Bushes reign as Republican president, and spread to the rest of the world. It began because greedy American banks (private sector) began throwing sub-prime mortgages at people who had no hope of affording them. Loads of bad, ill-thought out and unrecoverable debt resulted, banks had to be bailed out by the governments, job losses and private debt spiralled out of control and the massive decline in personal wealth plunged America into a recession. And because the US is such a major financial player on the global market, it spread to everyone else, and hit the fledgling "euro-zone" badly. The likes of Greece may now take decades to recover financially.
Easy access to credit pushed house prices up. People were getting the same house for more money. But they felt richer so they borrowed EVEN MORE.
Sub-prime in the US was just one part of the whole system of debt-upon-debt-upon-debt. New Labour played their part in that