HOW THE CREDIT CRISIS WILL CHANGE THE WAY AMERICA DOES BUSINESS

There have been more than a dozen financial crises since the end of World War II, after which markets rebounded quickly.


Today, more than half of all nonfinancial debt is held by the top 15 institutions, which are the very same firms that played a central role in creating an unprecedented amount of debt by securitization, complex new credit instruments and pushed for legal structures that made many aspects of the financial markets opaque.


We will see the end of an era of ballooning nonfinancial debt, but with the techniques and institutions that generated the tidal wave of debt creation now are in disarray.


Already we are seeing a dramatic slowdown in rate of growth of household and business debt, a trend that will continue for some time.


U.S. government borrowing will continue to swell, at least for a few years.


Source: Henry Kaufman, "How the Credit Crisis Will Change the Way America Does Business," Wall Street Journal, December 6-7, 2008.


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