Summary
IN JUST one week, the crisis in America's sub-prime mortgage market has exploded into a global flight from risk. Stock markets across the world have tumbled, with the UK's FTSE100 index down almost 10 per cent in less than a month. Nine central banks, including the European Central Bank and the US Federal Reserve, have had to inject massive sums of money to prevent a seizure in the financial system. On Thursday, President George W Bush sought to reassure America that there was adequate liquidity to ride out the storm. Yesterday it was the turn of Prime Minister Gordon Brown to provide assurance that the UK's economic foundations are sound.
Certainly the one comfort amid this disturbing market turmoil is that the fundamentals of the global economy have been strong. A widely expected slowdown in the industrialised West has been averted by continuing strong growth in the economies of Asia Pacific - China in particular. America's economy grew by an impressive 3.4 per cent in the second quarter, despite the marked slowdown in the housing sector. In Europe, Germany has provided the global growth surprise with a robust performance. And here in the UK the economy has continued to nudge 3 per cent growth despite a series of interest rate rises.See the full content of this document
Extract
Leader: All Change As Economies Falter
But much of this impressive performance has been due to a borrowing explosion. While low interest rates prevailed, personal and business borrowing soared, with a consequent house price boom. And the corpor...
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