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Will the “Credit Crunch” Affect Your Business?
Depending on how closely you pay attention to Wall Street, you may or may not be worried about the "credit crunch" that's currently got everyone in the financial world a bit worried.
Stemming from a growing panic that the economic problems facing the housing market will affect the larger American (and therefore world) economy, the current "credit crunch" refers to Wall Street's problems in August as concerns about debt securities and subprime loans sent markets into a downward spiral. (It has since recovered from this spiral, though somewhat tentatively, and many have been left shaken nonetheless.)
Wait a minute -- debt securities? Subprime loans? These are the sort of high-flown phrases that don't mean much to the average consumer. But don’t let down your guard: Problems that affect the higher brackets of the economy will inevitably trickle down to the consumer.
In a nutshell, the concern is that, as the housing market weakens, banks and investors are far less likely to extend more credit. When credit dries up, the economy tightens. When the economy tightens, consumers buy less. And when that happens, pretty much everything comes to a standstill. (And that’s when people start throwing around the dreaded “R” word … )
Yet, that hasn't happened yet, and experts still aren't sure if it will, and warn against assuming that the situation is really that dire. Nevertheless, everyone knows that the worst possible scenario COULD happen, and the housing market is being watched very nervously with just this in mind. (August's Wall Street difficulties were seen by some to be a direct result of this anxiety.)
The Federal Reserve is going out of its way to assure us that there's no reason to be worried. However, that just makes some people more nervous ...
• The Christian Science Monitor: "US Economy Weathering Credit Crunch, So Far"
• The New York Times: "Stocks Slip as Fed Says Credit Crisis is Contained"
• The Chicago Tribune: "Fed: Effect of Credit Crunch 'Limited'"
So, what do you think? Is the American economy going to take a hit over the housing market "crisis"? Or is all this talk overly cautious? Do you worry about problems with the general economy, and how that may affect your business? If you’d like to share your thoughts on this issue, head over the Aplus.Net Blog and let us know your thoughts. Until then—stay positive!
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