On the real economic activity front, for example, against a backdrop of the sustained rise in housing prices, the household sector in the United States increased borrowing and significantly increased consumption. On the financial front, new types of transactions such as securitized products and derivatives prevailed, and leverage increased.
Such “excess” in real economic activity, asset prices and financial markets influenced each other to generate further “excess.” Once the credit bubble burst, the unwinding of the leverage began, and liquidity in the global financial markets rapidly contracted.