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Too late

2007 nearly $4.50 of credit was being generated per $1 of GDP growth.
It is too late to stop the US recession and the slowdown under way in Europe and Japan
George Magnus, senior economic adviser at UBS Investment Bank, FT January 23 2008

The credit intensity of gross domestic product, or the amount of credit generated per $1 of GDP growth remained at about $1.50 for decades after 1950, eventually rising in the 1980s and peaking at $3 during the 1990s.

The credit machine went into top gear again and by 2007, nearly $4.50 of credit was being generated per $1 of GDP growth.

Between 2003 and 2007 over 70 per cent of the $4,500bn increase in credit market debt was raised by issuers of asset-backed securities, US government agencies and other housing-related entities

The credit surveys carried out on a quarterly basis by the Fed, the Bank of England, the European Central Bank and the Bank of Japan. These often-overlooked surveys could be among the most important indicators of how economies will fare in the year ahead.

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Comment by Rolf Englund (webmaster):
Is it really that GDP growth generates credit?
Is it not the other way around - that credit growth generates GDP growth and that credit contraction, unfortunately, generates "negative GDP growth", or shall we call the spade Recession, not to mention the D-word?

More in english by Rolf Englund

This banking crisis is serious,
not only because of the intricate relationships of banks with real estate assets,
but also because of the problems that institutions still have in recognising market values for weak or failing assets and
in securing adequate funding.
George Magnus, Financial Times Nov 29, 2007