Spiked is featuring an interesting essay by Phil Mullan on the credit crunch. He notes that unlike the downturns of the early twentieth century the current cycle isn't rooted in fundamental production problems. Instead the overheating of the upward credit spiral has been exacerbated on this occasion by the banks' misguided attempt to transfer risk through derivatives which spread the subprime debt through the system in such a way that nobody can now be sure who will be left holding the parcel when the music stops.
And Mullan suspects that the UK economy could be amongst the worst hit by this 'contamination' because of its relative dependance on the tie between inflating house prices and credit-fuelled consumerism plus the disproportionate dimensions of its financial services sector.
No comments:
Post a Comment