Economics focus Aug 7th 2008
From The Economist print edition
A housing slump helped cause the credit crisis. But its effect on spending may have been exaggerated
Illustration by Jac Depczyk
FALLING house prices have been at the heart of the rich world’s economic troubles in the past year. They led to the surge in defaults on American subprime mortgages that poisoned the market for asset-backed securities and drove up inter-bank rates. Mortgage-related losses have made international banks wary of lending to even creditworthy borrowers. The drying-up of credit has meant fewer buyers for new homes, leading to construction busts in America, Spain and Ireland. Now even countries unaffected by the global housing boom, such as Germany and Japan, are suffering from weaker export demand. More....
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