Is there a credit crunch II?

Back in 2008 there was some debate on the internet about whether there was indeed a credit crunch. My take back them (see comment here) was that there may be some conflation with market lending and market clearing - that some people were referring to a "crunch" as a fall in the level of lending whilst some were referring to it as a shortage of credit. You don't need to be an "equilibrium-always" theorist to acknowledge that "good" projects were still being funded, albeit what constituted a "good" project had changed. It's also important to acknowledge the likelihood that the media would over blow the crisis, and certainly the perverse incentives for policy makers to overstate the need for action. That said, there's the basic casual empiricism that makes it untenable to maintain that "nothing happened". The truth is obviously somewhere between these caricatures, but where?

The nuanced story is that whilst markets came *very* close to literally shutting down on 15/9/08, they didn't, and consumer lending continued throughout the crisis (albeit it a lower rate). The extent to which this "lower rate" constitutes a "crisis" is hard to pin down, and depends on the data you use. As Peter Klein pointed out to me in an email, 

Today's WSJ says consumer lending (US) has fallen by 4% from its July 2008 peak

The same article (which I can't find online now) also reports that

• corporate- and consumer-credit markets have shrunk in size by 7%, or $1.5 trillion, in the two years through early November
• The financial markets that support credit-card lending, auto loans and home mortgages not backed by the government are between 10% and 40% smaller than they were in the second half of 2007

And as for the classic litmus test

• One measure of the retreat in consumer lending: In 2005, over six billion credit-card offers flooded consumers' mailboxes. This year just 1.4 billion have been sent out

Some other data points support the general conclusion that loans have fallen by less than 50%:

• The size of the market for securities backed by loans tied to homeowners' equity has shrunk more than 40% since the second half of 2007.
• The market for securities backed by auto loans has shrunk 33%.
• For securities backed by riskier mortgages, the decline is about 35% since the end of 2007
• Commercial paper sold by businesses to finance payroll and other short-term cash needs has slumped by 35%

Again, whether these figures are the right ones to use, and whether they suggest a "crisis", remains debatable. I've always used the term "crunch" as a combination of how Mark Skousen uses it in his short primer on Austrian cycle theory ("What every investor should know about the gold movement"), and from the notion of "moments" used by postmodernists. But if you take the literal meaning, maybe you have a different outlook.

In a bid to reflect on the aledged "credit crunch", a couple of charts I found especially elightening. Firstly, the following series from the Bank of England

Monthly changes of
	monetary financial
	institutions'
	sterling net
	lending to private
	non-financial
	corporations (in
	sterling millions)
	seasonally adjusted

These seems to fit with intuition - the steep decline in 2008 (even becoming negative), followed by a sharp rise to take into account the policy response.

Finally, from The Economist. As the graph on the right shows, Euro-area loans fell during the credit crunch from a growth of 12% in early 2008 to about zero right now. That doesn't mean the loans have fallen, it means that they've stopped growing.