Credit Crunch (redirected from Liquidity squeeze)

credit crunch

A period during which borrowed funds are difficult to obtain and, even if funds can be found, interest rates are very high. Credit crunches were particularly severe before 1980 when the ceilings on interest rates that financial institutions could pay resulted in a drying up of deposits.

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Credit Crunch

What Does Credit Crunch Mean?

An economic condition characterized by extreme difficulty in obtaining capital. Banks and investors become wary of lending funds to corporations, and that drives up the price of debt products for borrowers.

Investopedia explains Credit Crunch

Credit crunches usually occur during recessions. A credit crunch makes it nearly impossible for companies to borrow money because lenders are scared of bankruptcies or defaults and charge higher interest rates because of that fear. The result is a slowdown in growth that leads to a prolonged recession (or slower recovery), which is compounded as banks hold tight to the banking reserves.

Related Terms:
• Bankruptcy
• Bear Market
• Debt
• Recession
• Subprime Meltdown