ABSTRACT
This part introduction presents an overview of the key concepts discussed in the subsequent chapters. The part argues that the 1990–1991 recession, and the ensuing period of slow growth, resulted not from traditional macroeconomic factors, but instead from institutional and regulatory rigidities affecting certain sectors in particular. It reviews several past economic downturns similar to the one in terms of the role played by capital markets and reduced capital availability, and suggests that reduced access to capital played a central role in all. The part shows that “credit crunch” is an unfortunate term; the Fed supplied substantial new reserves to the banking system, and those reserves were not left idle. One point was that the “credit crunch” seems to be a multinational phenomenon in the context of real estate loans, a fact suggesting not a “credit crunch” but instead a disinflationary process making real estate investments riskier from the viewpoint of lenders operating under very different regulatory regimes.
