Sunday 13 April 2014

The Economist: Debt was,then, both a cause and a consequence of the Great Recession 2008-9, and remains...

"IT WAS the growing rate of default on home mortgages in America that precipitated the financial crisis five years ago. These delinquencies, although not enormous in themselves, became impossible for some investment banks to bear, thanks partly to their own heavy debts. As the contagion spread throughout the financial sector in 2007-08, nervous or cash-strapped banks and other creditors stopped lending, thereby infecting the rest of the economy. Deep recessions and big financial rescues then led to a surge in government debt. That, in turn, raised fears about the solvency of various countries in the euro area, culminating in Greece’s default in 2012. Debt was, then, both a cause and a consequence of the crisis, and remains a big reason for its continuance".

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