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That whole credit channel thing.
Interest rates influence housing prices indirectly through the credit channel.
First, the failure of such a large intermediary could eliminate an important credit channel for a significant group of borrowers.
"The central problem in the U.S. is the breakdown of the credit channel, especially credit for small firms and for working capital," he said.
"Credit easing", for instance, involves the buying of specific assets, like commercial paper or mortgage-backed securities, in an effort to unblock a broken credit channel.
If the balance tilts against the euro zone, investors will shift the composition of their portfolios and deteriorate its credit channel.
Similar(44)
The E.C.B., though playing its own role in unclogging credit channels, is taking smaller steps.
Other credit channels are drying up so consumers may have little choice.
The aim is to support the economy by boosting liquidity and reducing interest rates when credit channels are clogged.
(OK, you can talk about possible impairment of credit channels and stuff, but again this should be something to focus on fixing, not a source of fatalism).
And with these credit channels now blocked up, investment-banking activities such as helping companies to issue debt and equity are a crucial way of channelling savings to businesses with good ideas.The stability argument is dubious, too.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com