It’s a phrase we hear all the time, Sub-Prime, usually associated with the worldwide credit crunch now current across the mortgage market. But where did it come from?

Some historians think it can be traced back to the Old West and the vast cattle markets of of Chicago and Nebraska. Traders labeled the finest cuts of meat as “prime” and the lesser cuts “choice” — something of a euphemism, obviously.

However, “choice” was usually translated in buyers’ minds as “sub-prime”, that is, something no-one really wanted.

Then “prime” was adopted by American bankers to describe rates charged to their most creditworthy customers. All others became “sub-prime”.

British banks apparently have more fruity terms. What in the States is called “sub-prime” is in England labeled a “lemon”.

There are a lot of lemons around just now.

Once again the housing market is in the financial news as it threatens to disrupt the rest of the American economy.

US Treasury Secretary Hank Paulson issued the warning following a two-day meeting of the G20 — the world’s 20 most industrialized economies.

Paulson said there would be continuing volatility in financial market because the sub-prime mortgage crisis is still unfolding. He insisted, however, that the US economy remains “healthy and diversified” and will continue to grow.

The G20 finance ministers agreed there was too much volatility in currency values — a dig at the precipitate fall in the dollar — but fell short of criticizing the weakness of the greenback.

This story will run and run.

Pundits are still concerned that the worldwide credit crunch will not abate until the full extent of the U.S. sub-prime housing crisis is fully known.

Justin Urquart Stewart, at Seven Invesment Management said, “The market cannot start to get any composure until we can find out how much damage has been done.”

The prospect of millions of borrowers — mostly poor, black Americans — defaulting on payments they could never afford, has fueled concerns of a credit crunch, making it difficult for almost anyone to borrow money. The interbank lending market has been particularly badly hit.

In the three months to the end of June, Standard & Poor calculated that U.S. house prices fell by 3.2 percent, the steepest decline since 1987 when its records began.

The collapse of the American sub-prime market, with all its attendant woes, both to borrowers and lenders, really hit home yesterday.

The European Central Bank, regulator of the Eurozone group of countries, piled into the markets with $130 billion of cheap, emergency credit.

In what was the biggest central bank intervention since 9/11, the ECB move came after reports that commercial lenders were desperately hauling back the supply of loans.

French giant BNP Paribas suspended withdrawals from three of its investment funds because of their exposure to the U.S. sub-prime market, saying “There has been a complete evaporation of liquidity” from credit markets, which could escalate into a worldwide credit squeeze.

Rumours were rife of impending fund meltdowns and banking collapses. Trevor Williams of Lloyds TSB said, “Liquidity has dried up basically. It’s a moment of panic.”

Nick Sparks, risk manager at F&C Partners, said, “People have got caught out. There will be more pain to come.”