Wednesday, August 15, 2007

Credit Crunch

Economists and commentators are all talking about a credit crunch. They make it sound like a rare, but normal part of the workings of the banking system. It does not happen very often, but from time to time investors lose confidence and a credit crunch follows.

For most economists, a credit crunch is just a deficient process. Many think that this process can be corrected by central banks by pumping in more liquidity. Just put the process right and everything will be fine. Oil the cogs and they will turn smoothly.

I have a different approach. I want to know if the credit crunch was the consequence of immoral behaviour. Was the crunched caused by evil actions? Were those evil actions made possible by man-made banking laws. I do not know the answer yet, but I am determined to find out. Can anyone give me a quick answer?

2 comments:

Gene Redlin said...

RON,

I'm guessing you know the real answer to this and want to bring us out.

OK. I have no idea.

As an economist I am anxious to hear your answer.

GENE

RonMcK said...

Sorry Gene
I do not know the answer. The technical workings of the banking system are so complicated, I cannot follow them.

Most credit bubbles are mostly the result of foolishness, but I suspect that we will also see some fraud coming to light as well.