A Year On, Credit Crisis Lingers

'Vicious circle' threatens broader economy
By Matt Cantor,  Newser User
Posted Jul 1, 2008 7:09 AM CDT
Trader Al Young, right, sits at a post on the NYSE trading floor, Thursday June 26, 2008.    (AP Photo/Richard Drew)
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(Newser) – Despite assurances from some experts that the credit crisis would be short-lived, the forecast remains bleak after more than a year of frustrations, the New York Times reports. In a “vicious circle,” falling home prices lead to more bad loans, which makes credit harder to get so that fewer people can buy homes, Vikas Bajaj writes. Yesterday, the stock market finished its roughest 12 months since 2003.

Meanwhile, the Standard & Poor’s index is off 14.4% so far this year, Lehman Brothers has dropped 70%, and bank loans, leases, and securities holdings have been sinking at the fastest rate since 1973; rising food and fuel prices are also threatening the market. And “eventually, the financial sector’s troubles will be communicated to the rest of the economy,” says a strategist.