We are lucky that we live in a global economy, and that the US wasn't left to bear the full brunt of the deregulated housing boom that it created.
US and gloabl banks over the last few years created a ridiculous scenario in the US. They essentially allowed anyone who wanted to buy a home to do so with no money down, a so-called "liar's loan", an option arm and maybe a reverse amortizing mortgage. What people were essentially getting from the banks was an option. The option was one that they could exercise if they wanted - if the value of the home went up, they would own it and, if the value went down, they could walk often with inpunity (except a damaged credit rating). The option realistically should have had a value, but in this case the banks gave this option out for free - marking the first time in history that anybody, other than the banks' own CEOs, got anything for free from a US bank.
After handing out something for free, the banks then turned around and pawned these obligations - the outstanding options - off on everybody else in the world. We are only too lucky that the Europeans were willing buyers. Had they not been, all of these options would have been left to have been absorbed entirely by the US economy. It would have affected the rest of the world anyway, but the fact that the pain has been spread around at this early stage in the global depression economy gives the global economic agencies and leaders a better chance to qualify and respond to the damage.
we live in a global wired economy. Everything moves in light speed now. Economic ripples go around the world in seconds. And, just maybe, that reality is going to somehow help us out of this mess.
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