JDMcDsblog

Credit Card Crunch

Originally uploaded by Bruce Sutherland

The BBC’s Robert Peston offers some good analysis of the cause and subsequent time line of the credit crunch. Here is Economic History in the making; as in all historical events we seek to construct a narrative and to identify caise and effect. Why did it happen? Each event begets the next,. and was in turn the effect of an earlier decision or event.. It is interesting to untangle the numerous threads of individual actions and personal tragedies that make up the so-called credit crunch-the reposssessions, the job losses, the collapse of household names and the general sense of gloom that now clouds just about every story.

The Guardian identifies 9th August 207 as the ket day in the saga; it was the day the ECB and the Fed jointlly injected $47 billion into jittery markets. Up until then banks had been lending increasing amounts to houseolders using all sorts of ingenious lending tools through securisation which packaged bad debt.. With the fall in house prices, these securities looked a very bad deal, and banks began to stop lending, firstly to each other and then to consumers;.

To quote Peston, the cause of our woes is that the banks were too keen to lend money and we were too keen to borrow it. In fact companies and individuals have borrowed about 2.5 times our national output. That’s a lot of money to pay back.