by Michael Snyder
The Economic Collapse Blog
COVID-19 has created an enormous amount of fear, and that fear is doing far more damage to the economy than the actual virus is. In an environment of fear, financial institutions become a lot tighter with their money, and that inevitably causes economic activity to slow down. For example, just consider what happened in 2008. Mortgage lending standards suddenly became much more strict, and that greatly contributed to the horrific housing price crash which left millions upon millions of Americans underwater on their mortgages. Unfortunately, this coronavirus pandemic has created a wave of fear that is far greater than what we experienced during the last recession, and that has enormous implications for the months ahead.
Extremely loose lending standards helped create debt-fueled “booms” throughout our economy in recent years, but now lending standards are going in the complete opposite direction very rapidly.