This crisis is about the wealth destruction. Nowhere is this more true than in the United States. According to the latest flow of funds data, US household net worth fell by 19.9 percent between 2007q2 and 2008q4, wiping out some $12 trillion of wealth.
With a hit of that magnitude on household balance sheets, a recession is a virtual certainty, which is of course, what has happened. US households have tried to repair their balance sheets, by consuming less and saving more.