"Another less than stellar analysis from 2002: http://www2.warwick.ac.uk/fac/... No, confidence doesn't just evaporate. Banks wake up to the fact that they are bankrupting themselves by making big loans to dodgy repayers and stop lending and start begging for money from the central bank to cover their losses. All it takes is an oil shock (1973) or tax change (1990) or bank run (2008) to wake up mortgage lenders and borrowers that the music has stopped: https://www.youtube.com/watch?..." - Adrian