credit crunch

System failure

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Ten years on from the “credit crunch” that threw the world economy into a downward spiral, reports suggest we might be heading for another crash. Tomáš Tengely-Evans investigates.

A decade ago last month queues began forming outside Northern Rock. The building society had been unable to raise the money to pay its debts. Cap in hand, its bosses had been forced to march up Threadneedle Street to beg the Bank of England for a loan.

Credit crunch: A winning formula?

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The credit crunch has wiped £600 billion - more than £1 million a minute - from Britain's total wealth in the past year.

According to a recent set of figures, which seem almost impossible to take in, these losses are caused largely by falls in the value of houses and shares. They begin to highlight the scale of the economic crisis which is upon us and which shows every sign of getting much worse before it gets better.

The emperors, and their clothes

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Two new books on the state of the economy expose the speculation and greed that have propped up Gordon Brown's so-called boom years

What a difference a year makes. The conventional wisdom at the beginning of last summer was that the economy was performing wonders. Graham Turner, Larry Elliott and Dan Atkinson were among a small minority of economists and commentators prepared to say the emperor had no clothes. Now everyone can see that they were right.

Economic crisis: Capitalism exposed

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Every time economic crises develop they are described as aberrations in an otherwise rational and balanced system. Chris Harman looks at the roots and implications of the recent credit crunch, and explains why crises are in fact an intrinsic feature of capitalism.

"Investors are no longer worried whether certain banks have enough cash. They are worried about the risk of a US or even a global recession." So the Financial Times summed up the fear of those who live off capitalist profits on 18 January.

Mainstream economic commentators agree on one thing: the crisis that began in one section of the financial system last summer could be about to create chaos through much of the capitalist system which they support.

Rate of profit warning

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No one can predict whether the recent financial crises will develop into a proper recession.

Some have hailed China's economic expansion and the development of computer technology as potential saviours of the world economy - Karl Marx would have disagreed.

The mainstream economic commentators have all been revising their calculations since the monetary crisis caused by lending to "subprime mortgages" broke in August. Alan Greenspan of the US Federal Reserve Bank thinks the odds on a recession next year have risen to about 50-50, and the International Monetary Fund seems to at least half agree.

Soft in the middle

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Anyone who has recently tried to obtain a mortgage or loan will have known Northern Rock long before the current crisis broke - it was a byword for favourable rates.

The company's spectacular demise has sent shockwaves through the money markets, government, investors and general public, who all look on in amazement as something supposedly so good has become so bad.

No one can remember queues outside a British bank as investors struggled to remove their savings. Those scenes seem reminiscent of Weimar Germany or the US Depression of the 1930s. They seem to presage worse economic news to come.

The global economy - solid as a rock?

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The recent ructions in financial markets and the collapse of Northern Rock have a familiar ring.

Whether it is the crash of 1987, the housing slumps of 1989-90, Asia in 1997, the hedge fund LTCM in 1998 or dotcom meltdown in 2001, the world economy has been grappling with a succession of financial crises.

And yet, each time the global financial apparatus has withstood the onslaught and, it appears, come back stronger and more robust than before. Encouraged, the major actors in this evolution of unfettered markets - financial institutions and their shareholders - have taken on bigger, bolder and more aggressive bets.

The financial panic that never was

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As we go to press the financial panic that made the headlines across the world in August seems to have subsided.

The message now from many of those who panicked is that nothing was or is amiss. After all, they say, the panic was only in the financial sector, not "the real economy". But it was not so simple.

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