What Does a Credit Crunch Look Like?

What doesn't it look like? Krugman has a picture:



His point here is right, for sure: Business investment is being held back by weak demand, not lack of credit. Would Tufte approve of that graph, tho? (It looks like one of those images of disk usage you get when you defragment your hard drive.) And more importantly: Why does it start in 1986?

It's an arbitrary date, and an especially weird one to pick in this context, because of what happens if you go back just a couple years. You call that a credit crunch, mate? Now this is a credit crunch:


See that spike over on the left? That's a country full of businessmen screaming as Papa Volcker stomps on their necks. (To be fair, it's their workers he was mainly interested in strangling, but the credit squeeze for business was no less real for that.) And that's what a credit crunch looks like.