1 What is the Credit Crunch?

This term is well defined in Wikipedia but the article is asking for improvement. It explains that banks run out of money to lend. The sad thing is that it does not question the assumption that the only source of money is a loan from a bank. Furthermore, it suggests that businesses need to depend on ‘credit cycles’ or liquidity crises.

However, it is paramount to distinguish between the financial economy of banks, insurance companies and other financial institutions and the real economy that consists of employees who sell their time and consumers who buy products and services. Entrepreneurs who take the risk of creating jobs, selling products and providing services should hardly depend on insecurities created by greed and short-term thinking of profits or return on investment, i.e. the fundamental immoral practice of making money out of money.

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3 responses to “1 What is the Credit Crunch?

  1. hello…

    i read many articles here and i actually feel they are really good…i would love to translate them to arabic as im making a blog interested in the global economic crisis to spread the awarness among arabic readers..

    i will add your articles in both arabic and english in my blog and i will refer to the author name and the link..

    but can i ask who is the author please?

    thank you very much

  2. It would be perhaps helfpul to explain that via the mechanism of fractional reserve lending, banks are able to ‘lend’ out up to 9 times the actual amount of their deposits. This effectively creates a never-ending inflation of their resources, hence a bank can never “run out of money”. A moment’s consideration confirms this. 90% of all our money is kept in a bank, probably more than this in fact. Inflation demonstrates to us that the money supply is constantly increasing, as new deposits are created from thin air. Money is never destroyed (unless you have a bonfire of £5 notes). All the money you take out to spend (even that spent by hedge funders and speculators) finds its way back to another bank account in little time. Bank deposits are thus ALWAYS INCREASING, and hence the amount that can be lent is ALWAYS INCREASING, far in advance of actual deposits via the fractional reserve fraud.

    ‘Credit crunches’ can only be artificially created by banks, who decide among themselves to restrict lending presumably for some more far-reaching end, I speculate perhaps to create recession in an economy to force political change or to foreclose businesses or private mortgages or other things such as ‘bank bailouts’ (!)

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