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KAI RYSSDAL: The currency markets were kind to the dollar today. The greenback mostly held its own against the Euro and the Japanese yen, despite some of those weak economic indicators I mentioned earlier. Confidence in the dollar overseas is generally shaky, which is pretty much the same way the rest of the world feels about the U.S. economy. Pain that's been spread abroad by Wall Street's excesses in subprimes. From the European Desk in London, Marketplace's Stephen Beard reports on America's least popular export.
STEPHEN BEARD: (In hushed tones from a quiet office) I'm sitting in the lobby of one of Britain's most successful private equity firms. It's very quiet. This is hardly a hive of takeover activity. (Phone rings ) There's only the occasional phonecall.
VOICE ANSWERING PHONE: Good afternoon. Alchemy!
Alchemy is named jokily after the medieval attempt to turn base metals into gold. The more recent magic of leverage isn't working any better. The boss John Moulton admits the huge bank loans of yesteryear that helped build his $4 billion business have vanished.
JOHN MOULTON: We had one of the major U.K. banks in here yesterday. Last year, if we'd asked them for less than 100 million we would have had our virility in question. This year: " Sorry we can't do more than 20 million." And they look really quite pathetic as they say it.
How times have changed. Before the credit crunch, the banks not only bombarded private equity firms with cash, consumers were pummeled too. The airwaves were awash with credit card ads. Now the Brits are deeper in debt than even the Americans, says Moulton.
JOHN MOULTON: Our consumers are loaded up to the armpits with debt , typically about 20 percent more than the average U.S. consumer. And the cutting off of fresh credit for consumer loans is one of the ways that the economy is slowing down here.
Conditions are still more buoyant here than in the U.S. But in London, there are signs the decade-long consumer boom is drawing to an end.
BEARD: Can I ask you, are you cutting back because of the credit crunch?
FIRST VOICE: Well, yes, I suppose, yes, we all are. Because, we don't want to be left with a huge debt and lose everything.
BEARD: What about you, are you cutting back too?
SECOND VOICE: Yes, I am a bit, yes. Having to be careful.
THIRD VOICE: Well, I haven't started cutting back yet, but I'm sure I will.
As in the U.S., the main engine of Britain's consumer boom has been housing, fuelled by cheap finance. Now, says mortgage broker Roy Boulger, the banks are pushing up mortgage rates in order to repel customers.
ROY BOULGER: So, we're in an odd market at the moment. Lenders are trying to make themselves sufficiently uncompetitive to avoid writing too much business, which they actually don't have the funds to lend.
And house prices are beginning to fall.
London's financial center is still thriving, but if it falters, the entire economy could be in trouble. John Moulton, the "Alchemist," says finance is the U.K.'s only world-beating industry.
MOULTON: If we lose our financial services businesses because of lack of confidence in the banks, it really will hurt the U.K. So, in many ways we're more vulnerable than the U.S. because we're so much weaker outside financial services.
(Construction sounds) London's office building boom has already subsided on fears that banks and brokerages will soon shed staff. Work still underway here on this five-story building in the financial district. But little comfort there. The main tenant was supposed to be Bear Stearns.
In London this is Stephen Beard for Marketplace.