I think that this presupposes that growth stems from those that are willing to borrow – when growth stems from the fundamental production (and international competitiveness of our production).

As far as I can tell the current problem stems from lenders unwillingness to loan to borrowers. If we tell lenders that they have to give up a 1/3 of there savings, this will probably make the situation worse instead of better.

The first best solution for me would be the full disclosure of information between borrowers and lenders – however, as this is practically impossible the goal is to get the market to function as well as it can given this asymmetry.

Another issue is the fact that there is a transition cost from the bankruptcies etc that are happening. Personally, I think we if we had full information we should let institutions fail – however in the absense of this information we have to take into consideration what will happen down the line.

There is no quick fix to the problem of freezing up credit markets – and in fact any attempt to create a quick fix will probably end up disproportionately hurting those not directly involved in the market (taxpayers namely).

“Another question, how much of this crises is a product in the rise of oil and therefore petroleum products?”

This is the result of asymmetric information between borrowers and lenders – it is not the result of a wealth transfer stemming from rising oil prices. The higher oil prices will slow growth in countries like NZ sure, but it is not related to the credit phenomenon.

“Isn’t there aways a crunch and recession soon after a steep rise in oil price?”

We didn’t see a recession in 2005/06 when oil prices rose sharply, but there often is a recession. For NZ an increase in petrol prices is a negative terms of trade shock – so it reduces our countries income. A reduction in our countries income implies we can afford less things, as a result a recession is a logical result of that.

Another question, how much of this crises is a product in the rise of oil and therefore petroleum products? If money was getting sucked out of wallets, consumer state and business and margins squeezed for the last two years wasn’t a credit crunch inevitable? Isn’t there aways a crunch and recession soon after a steep rise in oil price?

I think I’d include him with the classical economists 😛

It is more difficult when we think about contemporary economists as they are all so much more specialised. The most recent economist to fit this category is probably Friedman