, 2006).
Literature Review: According to an essay published online by Iain Dey, by September 10, 2007 some of Britain's largest banks were already concerned about a credit crisis. British bankers were finding it difficult to sell tens of billions of pounds of commercial paper loans. Because of their concern that notes would come due and funds would be unavailable to pay them, banks began hoarding cash. According to Mr. Dey, it was clear to insiders that financial markets were not functioning normally. Dey believes that financial markets are unlikely to function normally until confidence can be restored. Dey indicated that a return of confidence would only be possible after all sub-prime loan losses in the system were exposed and accounted for (Dey, 2007).
According to an essay by Kerry Capell published in Business Week, access in Britain to cheap credit has fueled more than a decade of unprecedented growth in home prices. In the same decade, consumer spending as skyrocketed. It is possible that Britain will suffer even more severely than in the United States from the current global financial crisis. British consumers are a key driver of the economy and are among the most indebted consumers in the world. British consumers owe more than $2.7 trillion in consumer debt. Household debt as a percentage of gross disposable income was 166 percent, compared to 127 percent in the US economy.
Capell writes that if housing prices in Britain began to fall even by a relatively small amount that banks' write offs are likely to grow dramatically. This result in part from the fact that for the last decade Britons have borrowed against the rising value of their homes despite the fact there has relatively little growth in real wages. Adding to this problem is the fact that the average home now costs roughly eleven times Britons' average annual salary, making housing less affordable now than at any time in the last fifteen years...