For months, we were in a credit crisis. Now, it seems, that we're in a credit crunch. Oh. What's the difference? Apparently, a credit crunch refers to a credit shortage. But what the flip is a credit crisis? I couldn't find a definition for it.
Off the top of my head, I'd say a credit crisis is when people or companies cannot make their debt payments. Then the creditor does not get his/her/its money. So the creditor cannot meet his/her/its payments, and so on, in a vicious cycle that in the extreme case leads to the collapse of the financial system. In the milder case a lot of people lose their property, which is sold at a discount to partially repay the creditors. Somebody gets property at less than its former market value, while somebody else loses his life savings, and lenders or taxpayers lose money. This can happen when (as now) a lot of money has been loaned to people who do not have enough income to make the payments, but it can also happen when there's been a speculative bubble in prices. In the present case, some clever folks figured out that they could make money in commissions making risky loans, and then dump the risk by selling the mortgages to unsuspecting investors. A credit crunch is probably when there's not enough money available for would-be borrowers. Production slows down because would-be purchasers cannot borrow money. All the above is supposition. My best guess at what the terms refer to.
