MUNICH - The American business model has collapsed. During recent years, the United States borrowed gigantic sums of money from the rest of the word. Net capital imports exceeded $800 billion in 2008 alone. The money came largely from selling mortgage-backed securities and collateralized debt obligations, claims against claims against American homeowners (or to be precise, only against the homes themselves, as the owners were protected by the non-recourse nature of loans).
The market for such securities has now vanished. While the volume of new issues in 2006 was $1.9 trillion, the likely volume in 2009 will be just $50 billion, according to the most recent IMF estimates. The market declined by 97%. No number reveals the true catastrophe of the American financial system more than this one.