CREDIT CRUNCHES AND REAL ESTATE BUSTS

The inevitable collapse of the real estate boom really shook the banks. Uncertainty about the value of the real estate collateral securing their loans made bankers unsure of how much capital they actually had - leaving many of them paralized, frightened, and reluctant to lend further...

Nothing we did at the Fed seemed to Work. We'd begun easing interest rates well before the recession hit, but the economy had stopped responding. Even though we lowered the fed funds rate no fewer than twenty-three times in the three year period between July 1989 and July 1992, the recovery was one of the most sluggish on record. (Alan Greenspan, The Age of Turbulence).

The above is an interesting paragraph from Alan Greenspan's memoir with many parallels to today's economic environment: a real estate bust, a financial credit crunch, and the efforts of a central bank intent on warding off economic Armageddon.