In the meantime only modest amounts of new bank loans will be available for the financing of consumption and investment. Thirdly, the deleveraging process to reduce the absurd excessive gearing ratios of some mega-sized financial institutions can only be accomplished by a reduction in world liquidity.
Taking account of the magnitude of the problem of over-leveraging as evidenced by the balance sheet information recently released for LTCM, this can become a major constraint on the availability of new funds in the global financial market over the next year.