I strongly feel we were headed down the same route, that the crash and budget deficits here would have happened anyway. It was RBS and Northern Rock that lent foolishly without consideration of the risks. Many banks offered 100%+ mortgages offered to people when we all thought the housing bubble would go on forever.
RBS and Northern Rock only happened because credit dried up and that they had played with credit default swaps and other toxic US assets. Remember before the crash, they were a great asset due to AAA ratings from the rating agencies. Add to the fact that Northern Rock provided mortgages to the lower end of the market, those first hit by any crisis (unemployment and so on). On top of that, banks often live short term on being able to get credit from other banks. And since the credit markets had frozen up due to the banks exposure to US toxic assets, then well. But yes, 100% loans.. stupid.
That wasn't sub-prime as I understand it in the US but banks were still lending to whoever wished to borrow on the slightest of financial investigation.
Not sure what you are getting at. The Sub-prime bubble in the US was on the private lending market which was unregulated. So any tom dick or harry could get a loan. In Europe (for the most part) house lending is regulated so not every tom dick and harry could get a loan. You needed a certain income and all that jazz. There was never a sub-prime situation in Europe. What happened was house prices fell and people who had re-mortgaged or just bought (at the peak) suddenly sat in a house worth less than the loan on it. And as always, the first to get hit in a recession are the low income earners who get fired first which was Northern Rocks problem. But yes, it was easier than "normal" to get a housing loan before the crash, but that does not mean everyone could get a loan.
I feel we would have crashed - there's been a growth in public sector to the tune of nearly a million since 2001 and no similar growth in the private sector, the banks lending recklessly etc.The question is the scale of the eventual crash, our banks follishly got involved with the US sub-prime market and that took the scale of the eventual crash to the atrsonomic figures we have now.
Oh I agree some what. But we have to be careful.... 25 countries in the EU, 50 in Europe, all with different stories. What is relevant for the UK is for example not for France or Denmark. For example, pre crisis, the Spanish economy was in surplus. The Danish unemployment was at a record low of around 2%. The Irish and Spanish "crash" was a given along with the Greek, but the rest.. doubtful.
Neither Kaya nor Paris nor myself are discussing fiscal conservatism from the point of a miracle cure - but something that would have said "hang on, this looks too good to be true."
I agree, but that is not fiscal conservatism, but common sense.. something conservatism often dont have!
It is common sense that we could not drive our economies forward based on rising housing prices.. which is what the Irish and US did and in part the UK. It is common sense that a country cant rely over 30% of its economy on a building sector that caters to non nationals.... aka Spain. And so on and so on. So yes at some point those things have to come home to roost, but regardless of this, they were not the trigger of the current crisis... the US sub-prime fiasco was. And as long as credit was cheap and available, then the European issues were all just fine.
Credit dried up largely as a response to the crash in the US sub prime and we have all the other consequences which we now see.
Exactly. That in turn drove banks out of business (or nearly), resulted in companies have to fire people so not to go out of business, and the negative attitude in media and elsewhere, meant that pessimism set in all across Europe and the US which in turn mean people did not spend nearly as much. Now Europe is lucky here since it does not rely on consumer spending in the same way as the US, but it did and still has a huge impact on the US, which in turn drives down the rest of the planet. It is a chain reaction, all because of lack of regulation in the US sub-prime market.