This economic situation has got more to do with discretionary expenditure. The cost of energy and food increased dramatically over a short period leaving few people time to change thier circumstances. Interest payments also increased over a number of years and people moving from fixed rate deals to tracker mortgages exacerbated the issue. The poorest communities, some on 100%+ mortgages were forced to default, as their outgoings increased too quickly. I think that this was the start of the deflationary spiral we are now seeing as people lose confidence in the riskier debt. Most of the money the banks were making were from the riskier financial products. In a more global context, the increase in the money supply drawn from these products were not backed up by material assets mainly in the form of energy. The lack of growth in industry, home sales, and therefore the lack of job creation, promotion etc. was due to the higher expenditure on energy. The banks would not lend to each other because they knew that the growth in development, industrial or commercial, would not match up to the growth in the supply of credit. The growth in the supply of credit was dependant on an increase in output (increase in energy supply) that did not materialise.

To quote Colin Campbell:

May 2005:

"banks lent more than they had on deposit because the banks had confidence
that the resulting expansion of all this investment.. was sufficient collateral for todays debt... this expansion is not going to go on anymore without the cheap energy to make it happen, that means the massive amount of debt throughout the world is losing its collateral. The crisis that might emerge could come instantaniously to the bankers..."