External debt is debt owed in foreign currency, which make an enormous difference when you are the United State since so much of the debt is in dollar due to it's quasi hegomony.

As for the U.K, the best europe economy during the crisis? I hope your are shitting me, the U.K media must be more delusional than I though if that what they were saying at any time during this mess since it is the european economy most dependent on it's financial sector. Germany probably is going to be the one which recover first.

It will get worse everywhere... the only question is where it will get worse the fastest.

I don't know, it all depends on how long the depression (yes I used the D word) is.

There are still a lot of financial meltdowns waiting to happen due to the "kick down the can" factor. Different countries have different vulnerabilities, as Malachi said one of UK's vulnerabilities is the dependence on the financial sector.

@kowenicki: So you think the financial sector is out of the woods? No more bad debt waiting to explode and things like that?

This global financial system is so complicated that I don't think anyone can claim that.

Well, the fact that the majority of the UK's banking system is currently under control of the Government offers a little more protection, as savers will feel safer with their money in these banks if they know that the Government can always back that up. One of the big problems was that savers lost their confidence and kept trying to pull their money out of banks - of course, the banks didn't have the money available and that started lots of panic (as large chunks of it was tied up in things like the sub-prime market).

Do you know what's the last country which had that philosophy of not letting banks fail and trying to buy some of their bad assets? Hint: the name starts with a "J" and ends in "apan".

That philosophy is proven not to work, yet it's exactly what the Western governments are doing today.

How weird would that be? Hotels ran by Governments. You'd have to fill out about 20 forms in block capitals just to get an extra pillow for the night.

At least the extra funding could go towards decent computers. Why is it that foreign hotels always have the shittest IT going?

You can't just take one piece of history and say that it will happen again, especially not in the economic world. There are so many factors involved in things like this that you can't just discard it because the idea wasn't successful before. It might not have been the Government taking control of the banks that was the problem, but what the Government did once it had control.

So far the UK's Government's schemes have proven to be quite successful in the short term (banks are becoming more profitable, lending more), and we won't know the long term effects for a few months now.

@SamuelIRSmith: To tell the truth I have read much more about USA's bailouts than the UK's (partly because it's where the problem started, and partly because there's more information available).

Here are two articles comparing the Japan situation with USA's current one. Maybe someone knows the key differences and similarities with the situation in UK:

http://www.nytimes.com/2009/02/12/business/worldbusiness/12iht-yen.html
http://www.american.com/archive/2009/don2019t-repeat-japan2019s-mistakes

The United States has more public debt than the UK has, by a large margin:

http://www.nationmaster.com/graph/eco_pub_deb-economy-public-debt

US - 60.8% of GDP
UK - 43.6% of GDP

You might note that Canada has a higher public debt than either country, yet seems to be only indirectly effected by the crisis. Our banks are as steady as a rock. Most of the trauma is from the general economic slowdown, the collapsing North American auto industry, and falling commodity prices.


Perhaps a more relevant statistic would be domestic credit to the private sector, which "refers to financial resources provided to the private sector, such as through loans, purchases of nonequity securities, and trade credits and other accounts receivable, that establish a claim for repayment."

http://www.nationmaster.com/graph/eco_dom_cre_to_pri_sec_of_gdp-domestic-credit-private-sector-gdp

The top country on this list is the country which has been hit hardest by the crisis, Iceland, with the United States close on its heels. But once again, Canada is right up there, with our financial system relatively unscathed.

If you're trying to single out the one most important factor in this current economic crisis, I don't think the answer is as simple as debt.