Maybe I see it too simplisticly (Glen will know better) but to me this whole cluster f*ck has been caused by banks over extending and giving credit to people who should never have qualified for it in the first place, and also all these companies kicking about making it too easy to declare yourself bankrupt and/or get debt written off...
Although the issue of consumer debt is a real one, the increase in consumer default is not the reason for the crunch. Basiclly all banks finance themselves on a daily basis, and when banks started to realise that a lot of the banks they were lending to had massively shaky balance sheets (over valued and over-rated CDO's, asset backed securities etc), they basiclly either stopped lending to each other or ramped up the financing spreads (so much so that any Bank of England reduction in rates has FA affect on the supply of money in the UK).
Obviously as the recession gets worse, we'll see the riskier debts and defaults rise but this is symptomatic in the UK, not the cause. Although credit had been easier to attain in the UK, it was still much harder than in the US, where mortgage mis-selling and extended credit (due to lack of sound regulation) is a primary cause of the crunch. Basiclly the trillion odd dollars of Mortgage Backed US Securities that banks used to sit on as triple A rated bonds to prop up the balance sheet, were worth close to f**k all.
Throw in stupid press reporting and a general market capitulation and that's why were in the mess we are.
Although after 15 years in the industry, I'm quite looking forward to being on the rock n roll for the next year. Might actually get the house finished.
