Rather, misallocation of credit leads to the misallocation of investment, both real investment and human capital. Employees are lured into sectors and firms that do not have viable business models. Once prices correct, these investments need to be reversed, with painful adjustments required in terms of employment and skills.
Baron Takahashi, who later became Governor of the Bank of Japan and eventually Prime Minister of Japan, wrote in his autobiography that he was utterly surprised by the fact that this American banker literally made the decision overnight. Even in those days, it appears, U.S. bankers had boldness and decisiveness when it came to completing a deal.