Many journalists are talking about a credit crunch, but what does it mean?
A credit crunch is an economic threat where borrowing money suddenly becomes much more difficult for everyone.
A credit crunch often happens after a period where borrowing money has been too easy. The 2008 credit crunch follows a period where banks have fallen over themselves to lend as much money as possible. Suddenly, when it becomes obvious that many borrowers have overextended themselves, everyone gets worried about how many loans will fail. So everyone stops offering new money for new loans.
The cycle is one in which binges (easy credit) are followed by purges (credit crunch).
