Once Again published in Economic and Political Weekly Bombay,Feb.29,1992,pp 437-8 Economic Review, Colombo, Vol.18, Nos. Recession Isn't Over.
Banks are supercautious in making new loans.
Hence the 'credit crunch' that keeps the economy stalled. The Federal Reserve Chairman, Alan Greenspan, told Congress last week that the hesitancy of both consumers and bankers 'is extraordinary and unprecedented'. The growing structural problems like lower rates of productivity growth and higher structural unemployment were not resolved or even abated by the succeeding recoveries. The recoveries themselves generated or exacerbated new problems, like the replacement of fixed exchange rates by wildly fluctuating ones in 1973, and the Third World debt crisis in 1982, following upon the increase in credit and interest rates in the 1970s. The recovery since l983 in particular generated many new problems, especially the replacement of real production, investment and productivity growth by growing financial speculation and debt as well as the exacerbation of imbalances among the United States, Japan, Western Europe, Eastern Europe, the Third World, and within these regions.