Credit crunch?

As we look at how to define the history of this crisis (read the Stiglitz piece in Vanity Fair, Capitalist Fools), we must question all our assumptions. An interesting question to answer is, was there a credit crunch?

I guess one could argue that credit is there for the taking and, beyond the original *confidence* crisis (where companies didn't trust each other's balance sheets), there is not broader credit crunch. Part of me says that banks must have retrenched to protect their balance sheets, but the other part says that if banks need to increase profitability, they need to take more risks and lend more. The evidence here suggests that there is credit available, and thus credit cannot be blamed for the crisis. The financial aspects of the crisis looks more and more like a bunch of bad acts by poorly regulated actors which have exploded in all our faces.

Pheonix rising (eventually)

A quick thought: as I read more and more of the continuous flow of bad news at the company level and of some investment funds, I keep thinking of how much better the system will be after the crisis is over. One hopes that the fraudulent investment funds, the poorly run companies, and the weaker business plans will all fall by the wayside. This crisis could see strong companies emerge, as a pheonix does, from the ashes of the current inferno. Of course, many bad companies will simply be bailed out, but I don't think that the government will save investment funds.

Who defines whether the recession is "mental"?

Does Phil Gram get to officially say if the US is a nation of whiners and that this recession, while official, is just mental?

Recession

As expected, the US recession started in December 2007.

The NBER's Business Cycle Dating Committee has announced that the US economic cycle has entered into what they define as a recession. I had posted about this before ("You know this but do you feel it?"). The data from end-2007 all pointed to a recession.

Please now that the "traditional definition" is no such thing. 2 consecutive quarters of decline are not the definition of a recession, at least not in the US economy. The NBER defines it as:

“a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators”