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Credit crunch

The credit crunch is the informal term for the decrease in lending activity that has made business more difficult for companies reliant upon leverage, or borrowed capital.

Causes and Effects of the Credit Crunch

There is some disagreement about the causes of the credit crunch, as well as about how lasting and extensive the effects will be. There seems to be some consensus, however, that easy lending practices and transference of risk played a part in causing the trouble. Consensus on the effects is much harder to come by, with some saying we are about to enjoy a resurgence in the financial markets, and others saying that we are about to enter another Great Depression. The actions of government and business will likely affect the outcome.

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