The current period of restricted growth and the onslaught of recession in some economies are attributed to the

CREDIT CRUNCH

Introduction

The global financial system is experiencing banking and financial turmoil commonly referred to as the credit crunch that is said to be due to the pricking of a massive debt bubble (Peston , 2009 . There is no standard definition of the credit crunch however , a credit crunch is generally described as an economic condition in which investment capital is difficult to obtain (Invetopedia 2009 . Credit crunches have been observed to follow recessions and do seriously stifle economic growth through decreased capital liquidity thereby reducing productive sector 's ability

to borrow . When this situation arises , companies are not able to borrow in to expand their operations and many may cease production altogether thereby resulting in bankruptcies . When such a situation arises , unemployment increases , homes are lost , banks close down and governments are forced to step in to contain the crisis , in most cases with limited success in the short run

This is not the first time that such a crisis has occurred . Records show that there was a crisis as early as 1622 and between 18th and 20th sixty two banking and financial crashes have been experienced (Henley 2007 Among the chief credit crunches that took place in the 20th century are the Wall Street in the year 1929 and the Japanese financial turmoil in 1990s

Genesis of the crisis

The genesis of the debt crisis is partly due to imprudent lending . An observation made by Liu (2008 p9 , an individual without a job or reliable income and...