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People around the country are being affected by the tough economic times that have hit America. The meaning of credit crunch is often misunderstood by many even though it is used a lot in these times. Here is a brief explanation of this term so that you can get a better understanding. The meaning of credit crunch is when the availability of loans from banks or other lenders is dramatically reduced, or the conditions in order for people to obtain them are made a lot more difficult for them to obtain. The credit crunch is often a result of banks and other lenders having the loans that they have previously allowed have gone bad. Thus making it difficult for them to recover what they have lost which results in them having to get a tighter grip on things to stay afloat. This is the situation that the automotive industry is seeing right now. They have not received the sales that they anticipated and this has put them into a position where they are having great difficulties in regards to paying back the banks and other investors that have given them money. With this being said, they have cut thousands of
jobs, and the people that have lost them are now being faced with the problems with paying their debts, resulting in many of these people losing their homes. It is a vicious circle. With the banks having troubles, makes things for the people all over the country far more difficult as they are not as willing to lend them money for fear of the risk. This is where we see the rise in the interest rates. This in return makes the cost of borrowing far more expensive and tends to make the loans that many small business and people need unattainable. This is tragic as it can result in businesses closing, unemployment rising, and more people that are unable to afford to keep their homes. With the rise of the interest rates, it is reflected in the spending habits of the majority of people as they are in fear of what will happen next. I know this is the situation where I live as the unemployment rate is extremely high and the jobs are few and far between. Many small companies are closing as no one can afford to spend the way that they were before. All of these factors are reflected in the meaning of credit crunch. This situation is affecting things globally as well. It is not just a focus of America only. It is like a ricochet and the bouncing effect is being felt around the world due to the poor economy in North America. Credit Crunch
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