A critical empirical question right now is whether the "credit crunch" itself is reducing investment (and/or spending on consumer durables) in the nonfinancial sector. The observation that investment has declined in some sectors does not answer the question one way or the other.
I expect, for example, that construction spending and automobile purchases are down. But is that to be blamed on a credit crunch? Or would construction spending have fallen anyway? After all, market demand for housing seemed to be down well before Bear Stearns or Lehman failed. Regardless of banking conditions, housing construction would be down.
I suppose it is also true that persons with low credit scores are having trouble obtaining mortgages. Again, that's no evidence of a credit crunch because those types of mortgages were supposedly the source of the problem in the first place. If that's right (I do not agree, but arguing against that conventional wisdom is for another day), then it is a good thing that those mortgages are not happening.
Wouldn't a constriction of credit supply of historic proportions show itself in very high mortgage rates? We have not seen those high rates yet. It seems to be that persons with strong credit ratings can obtain mortgages at rates that resemble those clearing the mortgage market of the past couple of years.
Automobile purchases would also be down, regardless of credit conditions, because oil prices are much higher than they were for years. Today drivers want to "be green" and get good gas mileage. American automanufacturs are not fulfilling those needs right now, so we cannot blame their low sales on a credit crunch.
Other sectors have to be examined if we are to discern an effect of the credit crunch. Furthermore, if the credit crunch is really significant outside the financial and other fundamentally weak sectors, then we should not have to use a magnifying class to find evidence for it.
I am still digesting this, but the Executive Board seems to find that major corporations are NOT suffering from a credit crunch. Mr. John Haskell wrote me that his surveys show that "Most large companies are still in an extremely safe liquidity position; they have long-term credit facilities and large cash holdings." I have not reviewed those surveys myself, but will update if and when I do.
[Added Oct 13: Mr. Haskell elaborated further: "The Corporate Executive Board finds that large multinationals are using good times of past to buy themselves time – they have long-term credit facilities and large cash holdings. One of their recent polls found that more than 70% were not planning on proactively drawing down on their credit facilities, and that they believed they could still access 80-90% of their credit lines. Obviously the experience for the lowest rated CP issuers may be different, but most major corporations are not currently suffering from a credit crunch."]