These countries have sought a return on their financial capital abroad by investing, for instance, in US treasuries. The increased demand for US treasury bonds has for a long time been pushing down long-term interest rates in the United States. In addition, the US central bank conducted expansionary monetary policy in connection with the recession at the beginning of the 2000s and in the years immediately following. The low interest rates have stimulated consumption and investment in the United States. They contributed in particular to house prices rising more quickly than household incomes. The rising stock market and house prices contributed to a reduction in household saving, which largely explains the rising current account deficit until the housing market bubble burst. However, the problems of a previously overheated housing market are not limited to the United States, they can also be found in a number of other countries. New forms of borrowing, including subprime loans, contributed to overheating in the US housing market During the years 2004 and 2005 new loan forms became increasingly common in the housing market in the United States, not least subprime loans. Subprime loans are loans aimed at households with low incomes. Often the lenders used very low interest rates during the first two years of the loan as an enticement. However, after this period the interest rates rose substantially. It is likely that the credit assessment of the households was not too comprehensive.
However, since the end of March the situation has brightened marginally as the  4  BIS Review 56/2009  bad news has been followed by some positive news. In the United States a number of confidence indicators are pointing upwards, there are some signs of stabilisation in the housing market and in household consumption. It is as yet too early to talk of a stabilisation in the US economy, particularly given that the labour market is continuing to weaken rapidly. However, there are signs that the rate of the downturn may be slackening. The Riksbank cut the repo rate further in April to attain the inflation target and to counteract the fall in production and employment Weaker growth is predicted The economic downturn in the world and in Sweden at the end of last year was greater than expected in the February Monetary Policy Report. Indicators point to developments still being weak at the beginning of the current year. There are still risks that the development of the global economy will be weaker than the Riksbank is predicting as a result of self-reinforcing contagion effects between the weak real economy and undercapitalised financial systems. It is also important to remember that different countries have different capacities and willingness to resolve the problems in the financial sector. They have also been affected to different degrees by the decline in world trade. The countries that have quickly taken concrete measures will probably come out of the recession first. This indicates that the recovery will not be synchronised.