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The Credit-Crunch Myth

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Three economists for the Minneapolis Fed have written a paper called “Myths about the Financial Crisis of 2008.” The myths they refute: 1) Bank lending to nonfinancial corporations and individuals has declined sharply, 2) Interbank lending is essentially nonexistent, 3) Commercial paper issuance by nonfnancial corporations has declined sharply and rates have risen to unprecedented levels, and 4) Banks play a large role in channeling funds from savers to borrowers. They argue that all four claims are completely false, and cite an overwhelming amount of data showing this.

In response to Alex Tabarrok’s posting of this paper, one commentator compares the credit-crunch claims to the fears of WMD in Iraq.

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