Sunday, June 22, 2008

European Housing Bubble Makes U.S.'s Look Tame

"Figure 5 shows total RMBS issues expressed as a percentage of GDP for nine countries. The U.K. still leads, but Ireland, the Netherlands and Spain also embraced the securities at the heart of the collapsing debt structure. Although Deutsche Bank and Société Générale bought into the mania, Germany and France seem to have generally avoided direct participation. The surprise is the United States, which, when compared to Europe, looks like the epitome of fiscal conservatism. For this puny ratio the firm of Bear Stearns no longer exists? Either the 'subprime' debacle in the U.S. was much ado about nothing, or the havoc wreaked on the U.S. financial system and economy by a relatively low ratio of RMBS to GDP bodes far greater ill for much of Europe when their own bubbles burst."


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