Talk:Credit crunch

Crunch versus sqeeze again. Time to merge yet?

There seem like the same problem, only as a question of degree, and could probably be the same article. A lot of the material in this article is already talking about a "squeeze" not a "crunch". -- Kendrick7^talk 20:37, 2 October 2008 (UTC)

• Support both mergers. This the more often used term, and a much better written and sourced article. Someone who works on these article should redirect the other two and merge as needed. NJGW (talk) 05:48, 12 October 2008 (UTC)

This article should be on it's own and not merged with anything. It has become a highly popular term used by newspapers, politicians and the public and as of such, should have its own article. —Preceding unsigned comment added by 92.41.190.81 (talk) 10:56, 13 October 2008 (UTC)

comment No one is suggesting we take out this article, only that the lead read ("sometimes called a "credit sqeeze" or a "liquidity crisis"). NJGW (talk) 11:00, 13 October 2008 (UTC)

Some people call it the squeeze (how you feeling the squeeze? we are all feeling the squeeze.) Credit crunch credit crunch cruch crunch crunch. Now my ears are crunched. Rant over, sometimes it's called the squeeze, but I hear credit crunch being used most of the time. —Preceding unsigned comment added by 79.75.123.194 (talk) 23:23, 22 October 2008 (UTC)

• Support. One article can cover the various grades of the issue in a much more sensible way - there is no need to have an article for every term wags come up with - they all are some aspect of the same thing. Just as long as the various terms of each stage are outlined in the article. LeeVJ (talk) 17:25, 28 October 2008 (UTC)

• Support merger of the 3 articles with redirects. Same subject matter, just different terminology...merger ASAP...Cutmynoseofftospitemyface (talk) 19:37, 5 November 2008 (UTC)

• Do not merge. See the archive page. EGeek categorically established that the terms squeeze and crunch were distinct and separate. The three terms should have their own entries. They are different. No one seems to read the archive pages before repeating issues that have been raised, researched and resolved months (even years) ago. Please read the archive talk pages before making suggestions such as this. - Ron Paul...Ron Paul... (talk) 22:49, 6 November 2008 (UTC)

• comment the citation EGeek uses does not distinguish between the two terms, and in fact uses them interchangeably:

"The results from applying the framework show that the region is suffering from an overall credit crunch, although the situation differs considerably across the countries in question. In Korea and Malaysia, where banks adjusted their rates more rapidly to rising money market rates, the wedge between lending rates and risk-free asset yields has significantly widened, indicating an increasing strain on credit supply by banks through the price mechanism. In the other countries, the credit squeeze has been rendered more through quantity rationing than through increases in lending rates. Furthermore, in all countries for which relevant detailed data were readily available showed unequivocal evidence of a flight to quality: banks shifting towards less risky assets (e.g. government securities); depositors turning to those banks perceived to be more secure (i.e., foreign banks, large banks, and state owned banks). All in all, this evolution appears to pose serious threats particularly to the financing of small and medium sized enterprises, and to sectors most affected by informational asymmetries" p. 4-5

Basically EGeek made a mistake. If there is no evidence provided that these terms are not used interchangeably within the next week I will merge the articles. NJGW (talk) 23:08, 6 November 2008 (UTC)

Reply EGeek is rarely wrong, and he wasn't wrong on this occasion. It looks like you didn't read the whole paper (just reading the intro is not enough). The World Bank paper clearly distinguishes between "crunch" on the one hand, and "squeeze" or "tightening" on the other. Yes, they use "credit tightening" more often than squeeze, but they clearly distinguish between the two concepts and go into some detail to explain the difference. "Squeeze" or "tightening" is different from "crunch". The World Bank says so. - Ron Paul...Ron Paul... (talk) 12:23, 7 November 2008 (UTC)

reply The term "credit squeeze" is used exactly twice in that article, and both times in paragraphs which make clear that the terms are being used interchangeably. Here's the second use:

"Furthermore, when the credit crunch ensues, there may be an additional channel negatively affecting SMEs in terms of availability and cost of external finance, that is flight to quality (safety) by depositors. Envisaging increased fragility of the intermediaries, depositors may shift their savings towards institutions that are perceived to be less likely to go bankrupt. For instance, foreign banks could be deemed safer than domestic ones; smaller banks may be viewed less likely to be bailed out by the government; and private banks are less likely than state-owned banks to be covered by government guarantees. Thus, an additional credit squeeze may hit those customers borrowing from smaller banks, private banks, or domestic banks which are suffering from the deposit flight, and typically SMEs depend more than other firms on small, private and domestic banks’ lending. The institutions which receive new flows of funds often have no established relationship with the borrowers of those institutions losing resources, and are thus less likely to make loans to those customers." p.12

If there are RS's that establish they two are different then please let us know, but this article clearly doesn't do that. It does differentiate between a crunch and a slowdown, but clearly not a crunch and a squeeze. NJGW (talk) 15:42, 7 November 2008 (UTC)

Reply to the reply to the reply I have a simple solution, which you should be delighted with. Let's change credit squeeze to credit tightening and keep it separate and use the World Bank paper as a reference. There should be no argument with this. I'll give it a go on the edits to show you what I mean and see if you can live with it. - Ron Paul...Ron Paul... (talk) 07:05, 8 November 2008 (UTC)

• note I've redirected Liquidity crisis here as there have been no sources offered over the past month which establish that it needs its own article. NJGW (talk) 23:16, 6 November 2008 (UTC)

Credit "Squeeze", Credit "tightening" or Credit "crunch" they are all basically the same thing...they all should be merged...Wikipedia is not a dictionary. Cutmynoseofftospitemyface (talk) 21:09, 8 November 2008 (UTC)

• I'm all for merging topics which are essentially the same but it seems that a crunch is qualitatively different from a squeeze. A useful precedent might be depression and recession. Colonel Warden (talk) 22:56, 8 November 2008 (UTC)

Colonel Warden, I would definitely agree with you if we had some source which stated as much or used the terms in ways which suggested as much, but the sources we are looking at clearly use the terms interchangeably. There are lots of sources which clearly differentiate between depression and recession, and one here that draws a line between "crunch" and "slowdown"... but nothing so far that calls a "squeeze" a "slowdown", or says a squeeze is different than a crunch. If you have something we can use that shows "that a crunch is qualitatively different from a squeeze" then that would help. NJGW (talk) 03:35, 9 November 2008 (UTC)

At the risk of repeating myself, this paper clearly distinguishes between crunch and tightening but squeeze appears ambiguous (it could be either). We should have separate articles on crunch and tightening and redirect squeeze to one of them (I prefer tightening). Simple. And referenced. - Ron Paul...Ron Paul... (talk) 07:53, 9 November 2008 (UTC)

Sources on which to base the merger or lack of merger

These lists are obviously non-exhaustive, and only what I've come up with in a quick search.

Explicit statements that "credit squeeze" and "credit crunch" are used interchangeably: World Bank paper and Businessdictionary.com.

Examples of the terms used interchangeably: Bloomberg, Business Week, BBC (also, their "credit crunch jargon list" does not include "squeeze"), IHT, Boston Globe, MSNBC[1], Gardian, Washington Times, CBS, New York Times, etc ad naseum.

Blog entry complaining that there is no differentiation. Raboplus.com.au (?) blurb showing slight ambiguity. The Economist glossary has a definition for "credit crunch", but no entry containing the word squeeze.

A completely different use of the term "credit squeeze" appears at investorwords.com (though this non-RS source has no definition for "credit crunch").

Can someone provide evidence to out weigh this? NJGW (talk) 04:40, 9 November 2008 (UTC)

• Merge proposal target renamed to Credit tightening but support merge. GetLinkPrimitiveParams (talk) 19:14, 18 November 2008 (UTC)

I've done the merge, which reflects consensus (after excluding banned user RPRP and apparent socks).JQ (talk) 11:01, 26 November 2008 (UTC)

Purge 2008

Could someone please edit the EL to remove the reference to "2008". It's not going to be relevant in the new year and the crunch is still alive and kicking. —Preceding unsigned comment added by 210.87.15.130 (talk) 08:13, 29 December 2008 (UTC)

Removed Text

I have removed the below unreferenced as I am not convinced about its relevance

There are a number of reasons why banks may suddenly increase the costs of borrowing or make borrowing more difficult. It may be due to an anticipated decline in value of the collateral used by the banks when issuing loans, or even an increased perception of risk regarding the solvency of other banks within the banking system. It may be due to a change in monetary conditions (for example, where the central bank suddenly and unexpectedly raises interest rates or reserve requirements) or even may be due to the central government imposing direct credit controls or instructing the banks not to engage in further lending activity.

Lucian Sunday (talk) 01:08, 1 January 2009 (UTC)

Your edits unnecessarily complicate the simple explanation that existed and provide nothing to the article. I totally agree with NJGW. I am reverting, but adding your unpublished Ferri piece as a reference (where it should live). I note that the Ferri piece you referenced isn't even published. Please don't edit or put stuff back in the article if it isn't published.

Would you say that you have been a little hypocritical? Lucian Sunday (talk) 10:12, 1 January 2009 (UTC)

No, I'd say I've tried to be conciliatory in attempting to incorporate your unpublished piece in the article. The alternative is to delete the unpublished (and marginally relevant) Ferri piece completely. Another editor may wish to do so. —Preceding unsigned comment added by VulgarKeynesianMilitarism (talk • contribs) 08:37, 2 January 2009 (UTC)

Recent edits and reversions

There has been a lot of odd behavior at this article recently, including the use of misleading edit summaries and repeated use of socks to avoid a block. Would each person who has recently edited the article please identify themselves and what their reasoning is here (especially those who might have a wp:COI in editing against eachother). To the editor who has been removing whole sentences recently (in all your manifestations), you have been reverted by three people in the past 48 hours... you're going to have to build some consensus here. NJGW (talk) 08:34, 5 January 2009 (UTC)

Article not at all clear nor that thorough

I would say the original author has not covered what is a complex subject with precision or accuracy. The banks screwed up I hope wiki doesn't! No wonder many academics view wiki with great skepticism... "A credit crunch (also known as a credit squeeze or credit crisis) is a sudden reduction in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from the banks". Wrong actually the credit crunch started slowly in 2006 with increased interest rates, and defaults on mortgages rising so that banks were finding it difficult to pay back loans. —Preceding unsigned comment added by 217.43.167.22 (talk • contribs)

(1) If interest rates rise, then the reduction of credit is an endogenous reaction to the rising price of credit/debt along the credit supply/demand curve, whereby a new endogenous equilibrium point is reached between demand and supply of credit. A "credit crunch" refers to an exogenous shift in the supply curve. See the UN paper refered to in the body of the page. So you're completely wrong about the 2006 issue. (2) The second assertion is bizarre and shows a complete lack of understanding of financial markets. Borrowers found it difficult to pay back loans. Banks lend, so they couldn't find it difficult to "pay back" loans. Borrowers borrow. How embarrassing. It shows how surprisingly accurate WP is on a host of issues. And how one embarrassed troll can be so wrong.—Preceding unsigned comment added by 86.146.245.4 (talk • contribs)

I would say the original author has not covered what is a complex subject with precision or accuracy, it is also very muddled and not easy to follow. No wonder many academics view wiki with great skepticism... "A credit crunch (also known as a credit squeeze or credit crisis) is a sudden reduction in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from the banks". This is not totally true and is only one narrow definition. I’m also not sure where this reference came from? I will edit the main document when I have the time. One definition is: An economic condition in which investment capital is difficult to obtain. Banks and investors become wary of lending funds to corporations, which drives up the price of debt products for borrowers.

The use of the word “sudden” by the author is absolutely inaccurate. Actually the Credit Crunch started slowly in 2006 with increased interest rates for home owners which led to defaults on mortgages rising far more than banks had calculated for. This meant banks would receive less payments from mortgage holders and in turn the banks found it more difficult to pay back their own loans that they had taken out to purchase the mortgage debt in the first place. (Banks borrowed money so they could purchase mortgage debt from brokers). If anyone wants a really good description of how the credit crunch developed, I would recommend www.johnabbey.co.uk Many thanks! Peter —Preceding unsigned comment added by 217.43.167.22 (talk • contribs)

Clear Spam. Possibly John Abbey himself? —Preceding unsigned comment added by 150.101.113.173 (talk) 01:46, 23 January 2009 (UTC)

You should be more respectful of other people's views. Economics is not an exact science which is why we are where we are today! I looked at Abbey's site it's really quite good. Suggestt you do the same. —Preceding unsigned comment added by 77.102.236.146 (talk) 08:04, 23 January 2009 (UTC)

Vandalism

Sad that there is vandalism on this page, but I can't remove it, because the page is supposed to be in semi-protected status..., well that is working out really well. —Preceding unsigned comment added by Anarchman (talk • contribs) 03:43, 23 February 2009

Huh? You seem to have been an editor for more than 4 days... NJGW (talk) 03:56, 23 February 2009 (UTC)