Is the US sub-prime mortgage fiasco responsible for the worldwide economic downturn?

[alice_in_wonderland]

Is it?

The US is a pretty heavy hitter in international economics. In fact, the US is probably THE heavy hitter.

Is the mortgage troubles there responsible for the economic downturn in the rest of the world? I know that we in Canada are affected by all things US - I'm wondering about other countries.

[ultrafilter]

Most countries export a lot of goods to the US, so the lack of consumer spending over here is definitely a factor, if not the major one.

[Tuckerfan]

It is somewhat simplistic (though not necessarily inaccurate) to blame the current global economic implosion on the subprime mortgage mess.

Part of it is clearly tied to subprimes, since so many people were taking out mortgages they couldn't afford, for far more money than their property was worth. Other factors include that the economic engine of the US was so heavily driven by the housing industry. Another factor is that the debt being ran up by Americans (both those who could afford the debt, and those that couldn't) was repackaged and sold in bizarre fashion to people all over the world. So, not only do you have a slowdown in demand by US consumers, you have people elsewhere suddenly not worth as much as they once were. Even if they still have plenty of cash in their pocket, they're loathe to spend it, because they're not worth as much as they once were. That their original value was artificially inflated doesn't factor into their thinking. They now see themselves as not being worth as much as they once were, and they don't want to let go of any money that they might have, for fear of winding up in a worse situation than they presently are.