At the same time, the ECB has gained considerable credibility from its handling of the global credit crisis.

Banking failure caused a credit crunch.

Moreover, money markets, especially in Europe, remain traumatized by the festering global credit crunch.

But, partly because several African countries have escaped the hang over from the global credit crisis, more investors are focusing on business opportunities there.

The international balance of payments remains in surplus, and there is still a net capital inflow despite the global credit crunch.

So the credit crunch will not ease quickly.

Today s crisis marks the end of economic growth fueled only by credit.

People are skeptical for understandable reasons, and in the case of the credit crisis, angry.

The Global Cost of Turkey s Crisis

In today s credit crunch, as in the Great Depression, central banks lend at practically zero interest rates.

At the beginning of the current credit crunch, many historically minded people picked 1907 as the key precedent.

Excessive rural credit was one of the important causes of bank failures during the Great Depression.

By loosening credit in this way, they recovered, one after another, from the Great Depression.

A Forgotten Crisis Lutheran World Relief

STANFORD, CALIFORNIA The current credit crisis has led to scaled back projections for growth around the world.

At its core, the global economic crisis is a growth crisis.

The global food crisis will not go away by itself.

It has been two decades since the last global debt crisis.

Those economies that are dependent on exports to the US and Europe and that have large current account surpluses (China, most of Asia, and most other emerging markets) will suffer from the G7 recession.

George Soros s recent book on the credit crisis is a good example of this line of thinking.

We have just passed through the worst financial crisis since World War II.

MOSCOW Skeptics of financial liberalization and innovation have been emboldened by the crisis in the world s credit markets that erupted in mid 2007, when the problems with sub prime mortgages first appeared in the United States.

The mortgage crisis and the credit crunch have led to bailouts for the banks and the nationalization of housing finance and insurance.

And the global food and financial crises threaten to stymie recent progress.

The recession in other advanced economies (the euro zone, United Kingdom, European Union, Canada, Japan, Australia, and New Zealand) started in the second quarter of 2008, before the financial turmoil in September and October further aggravated the global credit crunch.

The credit crisis exposed the flimsy foundations of the sustained growth that the US and Europe enjoyed during the past four to five years. While many had noted the extraordinary wealth transfer to oil producing states and China, the implications of this were not fully appreciated.

No, the main cause of the recent recession is surely a global credit boom and its subsequent meltdown.

The immediate problem is a credit crunch not so much in China as in the United States and Europe, where many small and medium size importers cannot get the trade credits they need to buy inventory from abroad.

The credit crunch will last much longer if we keep zombie banks alive despite their massive and continuing losses.

Credit Where Credit is Due

Following the 1997 crisis, there was a consensus that fundamental reform of the global financial architecture were needed.

The Shōwa Financial Crisis occurred after the post World War I business boom in Japan.

Indeed, just as microeconomic problems in the financial sector triggered a credit crunch and fueled a global recession, so microeconomic factors hold the key to recovery.

The fact that the current global crisis is a post modern one does not make it any less dangerous.

Hansen predicted that capitalism would suffer from a permanent underinvestment crisis. Banks would scale down their balance sheets in proportion to their reported equity losses and exacerbate the credit crunch from which the world is already suffering today.

Moreover, several African countries have received ratings from credit agencies, which has opened up global financial centers to them.

True, the US Federal Reserve has tried to prevent a recession by cutting its interest rates. But the Fed cannot endow the banks with new equity capital and prevent a credit crunch.

Consider the oil crisis that began in November 1973, resulting in a world stock market crash and a sharp world recession.

For all these reasons, the global crisis will not be devastating in the same way as the Great Depression was.

public provision of credit to the solvent parts of the corporate sector in order to avoid a short term debt refinancing crisis for solvent but illiquid corporations and small businesses

The European Central Bank managed to relieve an incipient credit crunch through its long term refinancing operation (LTRO), which lent over a trillion euros to eurozone banks at one percent.

Thus, banks losses on their toxic assets and their capital needs will be much larger than recently estimated, which will worsen the credit crunch.

If today s credit crunch has historical parallels, they are closer to nineteenth century normal crises like 1837, 1847, or 1857.

Another 1.5 trillion is needed to bring banks capital back to pre crisis level, which is needed to resolve the credit crunch and restore lending to the private sector.

Everyone who borrows or interacts with the credit system in any way would suffer a shock that would make the crisis of 2008 look small.