The Credit Crunch

The credit crunch all started in the USA in the subprime market. Subprime is the riskier end of mortgages. These loans started to be defaulted on and a whisper of recession was heard and panic spread all over the globe.


Northern Rock, a UK bank asked the Bank of Englad for a loan, soon after this was reported they had a run on the bank, people were queueing to get their money out. In February 2008 the bank was nationalised after two failed takeover bids refused to guarantee people's money. House prices began to fall in the UK in response to over inflated prices previously, the housing market bubble had well and truly burst.


Two US banks went bust, Bear Stearns and Lehman Brothers. This was declared the start of the financial crisis. I would debate this as I think the start of the financial crisis happened when Gordon Brown gave banks the licence to print money and let them regulate themselves. Think Lord of the Flies with Saville Row suits.


It wasn't all doom and gloom during this period China and India were thriving in this low competition environment, this did further compound our problems though as their high demand for oil was driving costs up resulting in higher food, energy and living costs.


The British Government went about trying to salvage the situation by spending taxpayers money on nationalising banks. I questioned at the time why shouldn't banks be allowed to fail?
Peoples money, savings, investments, houses, jobs......oh right, that's why. Then Gordon Brown should never have let the banks off their leads, he created a monster. *he didn't actually create the monster he just turned a blind eye (no pun intended) to the havoc they were causing.
Well in that case why aren't the bankers being sacked? Why are they still received bile inducing bonuses? Now they know they are too big to fail, they've got a confirmation sticker. Who regulates for greed?
And no Gordon Gekko, this amount of greed is not good, nor sustainable.


In summary the credit crunch was caused by an idea that we could have it all, the banks supported this idea and encouraged us to take on more and more debt. The credit bubble didn't just burst for the banks, it burst for the consumer as well. The financial hardships that we suffer now are a direct result of us paying back for what we shouldn't have had in the first place. It wasn't just the banks that are to blame, just because a loan is offered we don't have to take it, our responsible selves should have spoken up and said no, you just cannot afford it.