Exploring the causes of the Financial crises I discovered a potential point towards answering my question. This bring the relevance of the Overproduction theory towards Credit.
Amongst my research I found that one of the initial causes of the crises was the excess credit supplied to the people. This had in turn resulted in the banks revamping these 'subprime' mortgages into low risk securities which were then pooled with stronger assets. This overproduction had followed in the influence of easy credit conditions; interest rates were lowered by the Federal reserve by 6.5% to 1% in 2006; downward pressure on interest rates created by the high and rising US current account deficit, between 1996 and 2004 it had increased by $650 bn, 1.5% t0 5.8%.
In 2008 17% of homeowners had a mortgage that exceeded the value of their home, conveying that mortgages were over supplied, and the demand for them had restricted as people couldn't pay them back.
Amongst my research I found that one of the initial causes of the crises was the excess credit supplied to the people. This had in turn resulted in the banks revamping these 'subprime' mortgages into low risk securities which were then pooled with stronger assets. This overproduction had followed in the influence of easy credit conditions; interest rates were lowered by the Federal reserve by 6.5% to 1% in 2006; downward pressure on interest rates created by the high and rising US current account deficit, between 1996 and 2004 it had increased by $650 bn, 1.5% t0 5.8%.
In 2008 17% of homeowners had a mortgage that exceeded the value of their home, conveying that mortgages were over supplied, and the demand for them had restricted as people couldn't pay them back.