Reference no: EM131792756

Problem

It seems that the credit crisis or credit crunch, however way you wish to call it, is affecting every single global country, whether they have strong economies or not, whether they can boast of a flourishing sock market like the United Kingdom and France or have barely just set it up, like Russia. The harshness with which we feel the restriction of bank lending is a relatively recent phenomenon here in the United Kingdom (starting approximately in September 2007 with the collapse of Northern Rock), but it has been brewing for longer than that in America. Indeed, many experts are stating that the US Real Estate Crisis, which is though to have started the entire meltdown, began as early as April 2006. It is therefore understandable that bankers and stock-brokers alike link the fall of share prices and property prices to the same phenomenons which began in the US nearly two years earlier, setting-off what we now know as the credit crunch.

What we are asking ourselves here is why the credit crisis or credit crunch events in American are affecting the UK credit situation in such a dramatic way, and there are many theories to answer this question.