Kevin Drum points to an analysis by Goldman Sachs that suggests that a credit tightening by European banks could give the U.S. GDP a haircut:
If [European banks] decided to shrink at the same pace as in the period from 2008Q1 to 2009Q1 â?? the fastest decline during the global financial crisis â?? this would imply a decline of just under 25%. If so, the direct hit to US credit growth would be about 0.8 percentage point (that is, 3.3% multiplied by 25%)....How much could a 0.8% drop in credit supply shave off of US GDP growth? [A bit of explanation follows....] This would imply that a retrenchment by Euro area banks could result in a hit of 0.4 percentage point to US growth.
Yikes.
