The paradox of thrift – where individually rational actions are collectively damaging – was in full force. The shock and severity of the crisis had deeply shaken business and household confidence. Businesses were delaying investments and building cash reserves. Similarly, households were postponing major purchases and building up precautionary savings.
And banks around  BIS Review 117/2009  1  the world were curtailing lending and conserving capital. As a result, industrial production and world trade were plummeting. Nonetheless, in a decidedly minority view at the time, the Bank judged that the necessary policy responses to secure recovery were being put in place and that economic growth would resume later in the year.