Similarly, the economy cannot flourish without real growth in the supply of money and credit. South African banks cannot flourish without a strong economy. As a result, much of the capital of the highly leveraged banks was wiped out. US mortgages on the balance sheets of banks around the world – not only in the US – had lost much of their once-presumed secure value.
By the time house prices bottomed in February 2012, the average home had lost 32% of its peak value of July 2006. The value of an average US home had increased by an average of 9.2% per year between January 2000 and December 2006.
The global financial crisis (GFC) of 2008-09 was caused by the collapse in the value of US homes, as well as the globally-circulated securitised and mortgage debt that had funded a long boom in US house prices.
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