A slump originating in the banking sector has this additional feature. Even if Company B can find another project for which there might be a market, it will not be able to obtain working capital, at other than moneylenders' rates, because banks are unwilling to lend. As for long-term loans for new ventures, it can forget them.
This stylised picture is instinctively grasped much better by the proverbial taxi drivers and barmen who inform many journalists of the popular mood than it is by many academics, senior officials and top politicians. The economist who first got the process right in a big way was, of course, Lord Keynes. Yet there is now a campaign by some who regard themselves as his followers to play down the British economist's analysis of effective demand in favour of something they call “animal spirits”.
It is easy to understand their search for something of wider human appeal than the technical analysis of his General Theory. I myself have tried to do so by quoting at the beginning of some of my articles from Keynes's pro-spending remarks in informal talks and articles dating from the early 1930s before they were formalised in his magnum opus. But the preoccupation with “animal spirits” is quite the wrong way to do this, especially at the present stage of the business cycle.