Credit Crunch

Nowadays we can often hear about credit crunch.
This is the main problem of our time.
So at first we should understand what does "credit crunch"
mean. Credit crunch is an economic condition in which
it is difficult to get investment capital. Banks and investors
become wary of lending funds to corporations, which drives
up the price of debt products for borrowers.
So the main reason of credit crunch is collapsing of
housemarkets. Few years ago prices for houses was really
high. Then started overbuilding during boom period. It means
that there were built a lot of new houses which weren't so
necessary. 
After that housing bubble was burst. When houses were so
expensive it was useful for banks. People gave their houses
if they couldn't pay back money that they borrowed. So
banks sold their houses and made profit from it.
After the decline of house prices it was impossible to
refinance mortgages.  It was affect on the situation in
banks because they started to loss. Thus bank capital
levels reduced.  It caused to bank failures. This happened
with a lot of banks such as Lehman Brothers, Warchovia,
Washington Mutual.
If banks fail it is harder to get loans and interest rates
for loans are  although higher. So it will affect to the business.
If it is affect to the business so it will be risk of increasing
unemployment, business investment although declines.
So as you can see collapsing of housemarket affected
to the financial market and finally government tryes to
solve this problems by decreasing interest rates to motivate
people to invest their money.