Those of you with a longstanding connection to the local economy certainly recall the prolonged downturn of the early 1990s, which followed a real estate crash, cuts in federal military spending in the region, and a sharp contraction in local industries such as aerospace manufacturing. However, the increase in the unemployment rate was even larger during the recent recession than in the 1990s episode.
So far, the central government's guarantee for all deposits with and unsecured claims against the banks has created a good foundation for the banks once again to obtain financing in the national and international financial markets. However, what started off mainly as a liquidity crisis could turn into a genuine credit crisis.