The evaluation of negative effects of credit crunch and, how it was dealt with ? : critically evaluate the attempted to deal with the negative effects of the credit crunch

Abstract EN

The massive financial instability of 2007-2008 was in the main the result of lax monetary policy.

Regulation compounded this error by allowing and encouraging excessive leverage and maturity transformation by banks.

Innovation did contribute to reckless credit expansion and investments, but without lax money and excessive leverage, reckless bets on asset price increases wouldn‘t have been possible.

A financial crisis was precipitated in what has come to be known as the credit crunch/ economic meltdown.

Unlike the great depression, the current credit crunch came abruptly catching the world unawares.

The global nature and the measures taken to address the crisis have been baffling, thus demanding concerted international intervention.

Even more subtle are the implications of the current credit crunch on developing countries whose economies never experienced the great depression but now find themselves entangled in the global economy.