Credit Crunch: Where Do We Stand?
Author(s): Russo, Thomas A.
Russo explains interrelated forces that converged to create the current credit crunch. Russo looks at how US consumers find themselves increasingly levered, unnerved by a declining housing market, and unable to borrow from their homes to finance consumption.. The paper tackles the role of liquidity, asking whether we are in the midst of a global liquidity bubble contributing to excess valuations of certain assets. Finally, Mr. Russo comes full circle to the U.S. financial “crisis” where bank balance sheets are backing up with assets, potentially further reducing credit creation, further pinching the consumer.