What is the credit crunch?

Question

It's on the news and everyone's talking about it, but what actually is the credit crunch?!

I'm only 15 so everyone just tells me it means everything's going up but surely there's more to it?!

Anyone care to explain?

Answer 1

money is harder to get now than say 18 months ago. The restrictions on proving collateral, capacity to service the debt and stricter guidelines on credit are making getting a loan very hard in all sectors of business

Answer 2

I believe it is when tax and outcomes are sky high but incomes are low as ****. It all started with America (surprise surprise) when they gave out mortgages willy-nilly

Answer 3

'A credit crunch is a sudden reduction in the availability of loans (or "credit") or a sudden increase in the cost of obtaining a loan from the banks.'

wow. I learnt something today

Answer 4

Simply stated. A credit crunch is when lenders are unwilling or unable, for whatever reason(s), to lend money.

The reason prices go up is usually because of inflation. Inflation has more to do with too many dollar circulating in the economy. When there are more dollars in the economy than are necessary the value of the dollar decreases, so sellers charge more for their products and services to make up for the difference in value.

Answer 5

in a nutshell it means you cant buy flash plasma screen tvs and blue ray gadgets anymore because you have spent all your money on flipping gas and electricity and milk.

Answer 6

Banks have lent out too much money,Now they want it back.

Answer 7

well im 31 n stil aint got a clue exacly what its all about , tho from what i have heard our government have spent all the money on useless things instead of saving and now they are running out , so high lenders such as banks etc are now saying no to lending loans ,mortgages and credit cards

also house prices are rising out of control , peoples wages dont cover this s,o they apply to banks for a mortgage , banks say yes  to thosands of people , housing costs keep rising , people get in debt , banks lose money , hence the crunch

Answer 8

There is the issue with the credit/loan market getting overstretched because of a load of bad loans made in what is called the subprime market. This is basically loans made to people that can't afford to repay their mortgages in order to make it look like a loan company has a lot of assets on it's books.

http://www.thecreditcruncher.com/2008/06...

The problem is accentuated because the oil prices are going up (for fairly obvious reasons) and wages are not going up because people are starting to spend less (because they are concerned about the credit-crunch...)

The free market relies on confidence and there is no confidence about at the moment. This is not to say that confidence won't return, but the market fluctuates and often after a prolonged high with lots of market activity, suddenly the bottom drops out and we head for a low... sometimes those lows dip really low and that is what is happening now. It's a natural side-effect of the market-economy and Government should not really attempt to intervene (but they are worried about their votes - that's the down-side of a democracy where politicians just need your vote regardless of whether they have any good policies - I digress...)

The best thing you can do is keep control of your spending but as a 15 year old you won't have too much to be worried about unless you somehow have a stack of debts....

Answer 9

Over the kast few years banks have been lending money to anyone who asked for it.

Many of these people are now in debt and some are defaulting on their payments.

The banks have got scared of the bad debts and are tightening up on who they lend to (credit crunch)

A side effect has been that because all these people had so much credit, they were spending like there was no tomorrow and the shops had a field day.

Now people have less money so the shops are having to lower their prices

Answer 10

There is not enough spare money in the banks etc for them to give credit (loans) to people and companies.This squeeze of credit (loans)means businesses can't expand or invest in machinery etc so business tends to go into slow decline and they in turn lay off workers.

The reason money is scarce in banks etc is a bit complex.Ask me when your 16