If a house of cards collapses it happens either because of its own weight and instability or because of an external force – a nudge, a jolt, a passing breeze.

The conventional wisdom about the collapse of the house of cards that the banks built is that it’s the former. It’s purely down to greed – bankers building an unsustainable edifice of funny money with their CDOs, CDSs and other fancy derivatives, one that inevitably came crashing down around their ears.

The narrative also tells us that this is strictly a banking issue. It stems from banks handing out mortgages to people who couldn’t afford them. When they started to default, the lenders started to fail, inter-bank lending dried up and the issue developed from a ‘sub-prime crisis’ to a ‘credit crunch’. The failure of bigger banks has led to a general withdrawal of credit, a slump in house prices, a fall in business and consumer confidence and the prospect of recession or even depression in the OECD world. 

Increasingly I’m hearing commentators talk about how the credit crunch has ‘led to’ the downturn – as if there were no other influence at work. We routinely see newspaper spreads that combine coverage of the latest banking horror story with features on how it ‘affects’ folk on the ground - homeowners, hairdressers and restaurateurs – as if the one were directly and solely caused by the other.

Can this be right? Were we living in a trouble-free boomtown before August 2007? I don’t remember it. What I remember – as someone who works with companies to articulate their messages and concerns – is that before the sub-prime panic, there were still plenty of worries in the business world. But they were longer wavelength ones – the shift in global economic power from west to east, the strain on natural resources, the intensity of global competition, the pressures caused by a soaring world population. Can it be that these issues – now on the media’s back-burners - have no linkages to the crunch? Did the credit bubble just burst under its own pressure?  Or in fact wasn’t there already talk of a possible approaching downturn before what now seems like the year zero of summer 2007?

I just tracked back to the OECD’s review of leading economic indicators for March 2007 – a set of metrics designed to provide early signals of turning points - and found that my memory hadn’t failed me. Even then the indicators were suggesting “some moderation in economic expansion”, with weakening performance in the composite leading indicators in all the major seven economies, partly driven by lower business confidence.   The Bank of England’s MPC minutes also reveal that earlier last year UK consumer demand was softening, exports were lower than expected and the housing market was entering the doldrums.

Meanwhile, in the US, things were far from rosy way before ‘sub-prime’ made prime time news.  A study by the US’s Economic Policy Institute has shown that the increasing US trade deficit with China cost 2.3 million American jobs between 2001 and 2007, including 366,000 last year alone. Is it not possible that some of those 2.3 million were the same people that defaulted on their home loans after their factories closed down and their jobs were transferred to cheaper workers? For a long time it’s been the case that much work can be done more cheaply in China or India than in America or Europe. Could it be that the tipping point is in sight? A KPMG survey of corporate investment plans this year showed that China is expected to overtake the U.S. as the world’s leading recipient of corporate investment in the next five years and India is likely to see the largest growth in its share of foreign investment overall. Could these factors not have something to do with the loss of confidence in institutions which depend on western housing markets and western consumers? 

Well before last summer, companies were also complaining about the effects of rising oil prices and other commodity costs – again not a stand-alone phenomenon but a function of rocketing demand from Asia coming up against the increasing challenges of producing resources such as oil found in remote locations like deep oceans and the Arctic. High commodity prices have been telling us for years that many of the world’s natural resources – water and minerals as well as oil - are under strain as its population grows in both number and wealth. Ecologists have been saying since the Brundtland report that our growth is unsustainable and latest reports from the Intergovernmental Panel on Climate Change and the UN Environment Programme show that they have been spot on. 

Finally, companies have been under pressure from changing investment patterns for several years. Big pension funds have been diversifying into commodities and bonds. For all but the hugest companies, the threat of private equity takeover has loomed. Hedge funds have subjected equities to a new level of intensity. The prevalence of short selling has meant that CEOs not only have to worry about once-supportive investors selling their stock but actively hostile investors borrowing it in order to destroy its value.  So a sense of unease pervaded many boardrooms well before the summer of 07.  Huge companies like General Motors were slashing jobs three years back to contain costs and placate investors.  Put the words ‘job cuts’ plus the name of any large company into Google and there’s a good chance you’ll find references to redundancy programmes underway well before last year.

I’m not an economist and I can’t prove connections between these wider forces and the credit crunch. But neither can I believe there are no connections. And if there are connections then I want to understand them properly. Should I believe the optimists – ranging from estate agents to analysts – who are telling me that this is a cyclical downturn which will be followed by a recovery  – and in fact I should buy shares now because we’re at the bottom? Or am I right in my suspicion that this is a once-for all correction in western economies where everything is being exposed as overvalued in the new context of a global marketplace? And is even that correction part of a longer domino effect in which global growth – however distributed – is yanking everyone at speed towards a resource crisis as it overwhelms the carrying capacity of the planet?