Credit crunch

Credit crunch is a reduction in avaiability of loans or a sudden tightening of the conditions required to obtain a loan from banks.

Credit crunch is often caused by inappropriate lending which results a loss for banks and financial institutions. For instance, America banks allow those have poor credit history take mortages,which they were unable to pay.Banks often lending money to and borrow money from each other, thus, a lot of these loans that people were unable to pay had sold to many banks in the UK. As the results, many banks experience losses in term of bad debts and there are less money movement between banks, which cause a shortage of avaiability of money.

this link show how it was began>>>http://www.guardian.co.uk/business/2008/aug/05/northernrock.banking

This certainly affect the average man on the street, because banks and financial institution have to increases the fees and rates on loan, credit card, mortgage and etc to cover the losses, and tightening the conditions required to obtain a loan from banks to keep the bad debts low.therefore, it is hard for people to borrow money from banks.
This results several consequences:

• A reduction in investment.
• loss on confidence
• reduce inflation
• rise unemployment rate
• increases government spending