Credit Crunch Essay
An economic condition in which investment capital is difficult to obtain. Banks and investors become wary of lending funds to corporations, which drives up the price of debt products for borrowers.
Credit crunches are usually considered to be an extension of recessions. A credit crunch makes it nearly impossible for companies to borrow because lenders are scared of bankruptcies or defaults, which results in higher rates. The consequence is a prolonged recession (or slower recovery), which occurs as a result of the shrinking credit supply
The global credit crunch, which has dominated financial news headlines over recent months, continues to wreak havoc across the UK. Since it made its way across the Atlantic last summer …show more content…
Those with bad credit have also been hit hard, as lenders are being far more cautious about who they will lend to, and those with damaged credit face an increased risk of rejection due to the credit conditions caused by the global credit crunch. A combination of these cutbacks and changes in both the mortgage and the general financial markets has resulted in severe difficulties for many people, and industry experts, including banking officials, have stated that the situation is set to continue over the course of this year.
However, although developing countries may not have lost money directly. They will notice the effects indirectly. • Foreign Investment likely to fall. The credit crunch in the west means developing countries