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Comment by cwan | Hacker News Reader

I think leverage made the difference - but at the same time, leverage ratios of European banks are significantly greater than that of US banks. There are others who have also said that it was the bubble in excess capital/credit which made the difference between this one and the tech / real estate bubbles of the past. This excess capital was caused by a number of factors that included the USD as a reserve currency (which is why those like Stiglitz now think that a move away from this is a good thing - though this is happening because of the massive borrowing by the current US Administration) and prolonged low interest rates by the Federal Reserve,

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I think the Europeans have problems just as bad as the Americans, but it looks different because of national organization. Most of the problems in America are in California, Florida, and Nevada. If these were separate countries rather than separate states, then the situations would look more similar with some having crushing problems (like Iceland and Britain) and others seeming relatively unscathed locally but affected by the global nature of the downturn. European banks have taken a huge beating, and there have been multiple bailouts. I also consider it likely that there are still unacknowledged problems in other banks that seem healthy so far. The pain filters down more readily to average Americans and Brits because they were the ones borrowing money for houses they couldn't afford and because continental political systems have stronger social support systems. I expect that it will likely take the European economies longer to recover than the Americans unless the US government borrows so much money that it starts to affect its de-facto credit rating.

Not many people bought houses they couldn't afford in the UK. We haven't had huge numbers of repossessions in the UK (fewer than the 1991 recesssion so far). Our banks were more exposed to the american housing market (than europes), and banking is a large part of our economy so we get hit worse when it goes down the tubes.

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