Credit Crunch

The recent credit crunch have left many financial institutions crippled and have left many homeless and millions of jobs have been lost due to the bankruptcy and closure of many firms around the world. There have been numerous articles and publications on the recent credit crunch crises which all state one thing in common. This has been defined as the sudden drop in the overall availability of loans (or credit) or a sudden increase in the cost of obtaining loans from banks. The financial crisis has been the worst in years and therefore has had an impact on the worldwide economy, how the business is carried out. The global overview on the economy looks grim and dull. Many experts believe that the credit crunch could last for a long time.

Once considered as a financially stable country, Greece is now on the edge of having a financial default. With a debt total amounting to an estimated $420 billion, experts say that this debt would have been bigger that the country's economy itself and this debt is predicted to increase as time goes by because Greece spends 12% more than it gets revenues. So what's exactly went wrong with Greece and how did they get themselves in deep trouble?

According to Mortgage Guide to Credit crunch it "refers to a sudden shortage of funds for lending, leading to a resulting decline in loans available". Credit crunch generally means that there is little money available to the banks to lend to the customers. There are various reasons that can cause a credit crunch such as high interest rates, shortage of money in the capital markets. But the main reason behind the current credit crunch can be attributed to the failure of the U.S markets which was fuelled by the defaults in the subprime mortgages which eventually spread to Europe and then throughout the world. This snowballed into a domino effect which led to the failure of various firms such as Lehman Brothers, AIG which had to be rescued by the U.S government and the Northern Rock crises in U.K. Fuelled by raising inflation and sky rocketing fuel prices which added to the worries of the common man.