Credit crunch.

Credit crunch is one of the accompanying effect of financial crisis. Actually financial crisis is credit crunch. Anyway, credit crunch is a reduction in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from the banks. As we know that all business in the world works by using credits or  loans. Thats why the credit crunch is very harmful for the whole economy. 

So, lets have a look on causes of credit crunch. This may be due to an anticipated decline in the value of the collateral (for example, when the business is taking a credit, it has to prove security of the loan for bank by putting usually fixed assets as guarantee for repayment the loan); an exogenous change in monetary conditions (for example, where the central bank suddenly and unexpectedly raises reserve requirements or imposes new regulatory constraints on lending); the central government imposing direct credit controls on the banking system; or even an increased perception of risk regarding the solvency of other banks within the banking system. A credit crunch is often caused by a sustained period of careless and inappropriate lending which results in losses for lending institutions and investors in debt when the loans turn sour and the full extent of bad debts becomes known. These institutions may then reduce the availability of credit, and increase the cost of accessing credit by raising interest rates. In some cases lenders may be unable to lend further, even if they wish, as a result of earlier losses.

What does credit crunch mean to banks? Usually - losses! Because banks earn their money by giving credits (interest rate). Banks also have to pay their deposits (percentage). So credit crunch also has negative influence on the bank system.

Now I want to give some examples of influence by credit crunch on economy. Lets imagine a situation in the economy, where banks don't want to give credits (to business). Companies (especially retailers) are not able to work because they don't have money to built a new assets (like buildings), so their production slow down. People also are less wiling to buy a new property, because they cant take a credit from the bank(unless they have their own money, but usually people buy property on credit). So companies(builders) wouldn't sell their product, and then they would probably have to reduce their production by reducing labour (usually). So people would earn less money and also would not be able to take a credit.

I think that solution of credit crunch is government intervention. The government has to help banks by recrediting (emission  government's bonds). It also could be another ways of solution (like using bank's reserve fund )