Money cannot disappear. Several companies, and financial institutions lost money, and many lost their homes. But where did the money go? Or, in other words, who profited ?

Mike, Chapel Hill, USA/ North Carolina

I was writing about the dangers of this sub-prime market over 6 months ago in my Businessweek MBA blog. I had the benefit of talking to some senior management especially in mortgage-backed securities at companies like Bear Stearns quite some time ago.

The problem that you highlighted is that these complex packages of debt were being sold in world wide markets without any understanding of what was in them (their intrinsic worth). It was very hard to work out the liquidity or risk of these instruments. Whilst the value was going up no one thought to question the value. As in most bubbles no one cared as long as they were going up.

Now people all over the world are discovering what's really in these packages & it's a nasty suprise! A lot of them are completely worthless and it's causing shocks in the market so great that some respected experts are now saying this could lead to recession. The first time the 'R' word has even been mentioned since 2001- scary

Rudy E Parker, Cambridge, Massachusetts

Americans on low incomes?

Pete Balchin, Solicitor , Bristol,

All these foolish banks in the UK who have lent above three times the borrower's salary for the past 10 years are going to regret it soon. Is there no continuity of policy in these institutions? Is there no one in a position of authority in the Halifax, HSBC, etc who remembers 1989 onwards and says "No"! Prepare for the long-awaited crash - it's going to be painful....

John Tomlinson, Brentwood, UK

what the banking world have to understand money lending is differant to loanarranging.money lenders send the baseball bats around to collect, so today we a hybryde all risk no return bad banking in my view, its a crack hopefully not an eathquake.
the real problem iswhy give your savings or pension to bank who are unable to understand the difference.

michael joseph heavey, cahersiveen/adams town, MADNESS

Usury - the insistence on taking interest on an unproductive loan - has been condemned throughout history as immoral. In Traditional Catholic teaching, charging a mortgage on a house is a mortal sin (and the householder is not under a moral obligation to pay in full). And there is a mathematical certainty that a financial system based on usury is unsustainable. Like an Empire, it can survive & appear to thrive while it is expanding, but only because it is parasitising real wealth that is not yet exploited. The moment the Empire stops gobbling up subject nations, it goes bankrupt. The International Monetary System is feeding on money that doesn't exist. Sooner or later, Reality must manifest itself. In the Middle Ages, usury was illegal. Buying a neighbour's business for the purpose of closing it down was a hanging offence. It was illegal to evict a man, or take away his trade tools, however big his debts. The lender cannot morally be given total protection & the borrower none.

Michael O'Farrell, Cork, Ireland

"It's different this time". That's what the lazy, incompetent city whizz kids always say to support their high risk decisions. The trouble is, the majority of city types just ride one bandwagon after another looking for big bucks and taking massive risks with peoples pensions and investments. Let's hope the city gets culled back down to a rump of sensible poeple who actually work hard and deserve the bonuses they get.

Rob, London,

Fantastic article. I thoroughly agree with the main point of this article. I have been monitoring the US property market for the past eighteen months and the problem of foreclosures has been steadily increasing, which can be attributed to a number of reasons. Of course the sub prime lending market is vital, but the worsening economic situation in the USA in general has also caused this. Take Detroit for example - Ford's continuing woes have turned parts of Detroit into virtual ghost towns, and matters don't seem to be improving. The only thing that surprises me is why it has taken so long for the markets to react to this. America sneezed long ago.

Hassan Azam, Banbury , Oxfordshire,England

Not just in retrospect; it's been obvious for the past few years to anybody with half a brain who wasn't blinkered by vested interests or mindless optimism. Thankfully I've been preparing for this for ages. It's been hilarious listening to people explain Britain's housing bubble as being caused by supply/demand fundamentals rather than by the availability of cheap credit. Enjoy the negative equity, folks; I'll be enjoying my zero debt, cash surplus and precious metal holdings.

Kaitain, Vancouver, Canada

"To be honest, no one is quite sure who’s lost what.” So panic with the mob to door, eh!

Brings to mind a parity, on an old Hemingway commentary;

Panic, as distinguished from cowardice, is almost always, simply a lack of imagination to suspend the functioning of one’s ability to suppose the positive over the negative and persevere the likelihood that the darkness before the dawn is but prelude to a brighter time to come.

The again this is well exampled of the age of self-appreciative narcissism and Schadenfreude zealotry we live in, eh?

Feralgrognard, Highland Park, USA

Make up a sentence from the following words :
home - chickens - coming - roost - to

Sorry chaps, looks like the parties over..

Arrgghh!! No more buying some run down old gaff, painting the walls magnolia, and making a quick £40K.

Oh, and if you're an over-leveraged BTL - never mind, you can always go for an IVA (if the bank will accept it....)

Martin Emery, Burnham on Sea,

Oh really ! "In retrospect" ? Ms Kennedy must have had her head in a bucket not to have seen all this coming. You were given plently of warnings; by officials (IMF, BIS, Volker, even Greenspan), economists (Austrian mostly - and for many years) and the market - remember HSBC only a few months ago ?

Reckless lending and the rampant inflation it brings was not countered by the use of securitisation and the ability to get the risk off one's books - breaking the age old nexus between borrower and lender.

Now the central banks are up to their usual tricks of reflation and bail outs (which caused all this in the first place)- but this time the story may be different.

The difference between real money and credit created out of thin air is starting to become increasingly apparent and we've only just rounded the top of the roller coaster...

Bernard Harper, Sydney, Australia

Why in retrospect was it inevitable? It was clear to anyone with a half functioning brain that this was going to happen!

ADScott, Bangkok, Thailand