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Credit Crunch |
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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: How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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Sensible banks would respond by pulling back exposure everywhere because a credit crunch in an industry like steel or automobiles could have vast implications for debtors in all industries. There are many signs that a credit crunch is already underway. Teikoku cited "institutional financial support [from] the government, a decreasing number of promissory notes due to the credit crunch and avoidance of bankruptcy risk, with controlling investment for new business or facilities. |
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