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Unformatted text preview: dollars in July of 2008. Furthermore, the widespread distribution of credit risk and the unclear effect on financial institutions caused reduced lending activity and increased spreads on higher interest rates. Essentially, these losses led to a major liquidity problem in the US economy. With less money available for investment, business activity slowed, and unemployment levels increased. Simultaneously, more and more people continued to default on their loans. Unemployment coupled with a poor housing market has thus had a spiraling effect. With less money available for loans, business activity has also slowed, as capital is not readily available. Furthermorew, the Solvency problem in America has led to a liquidity crisis, a credit crunch, and slowed business activity....
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- Fall '08