IN the clearest indication yet of the depth of the credit crunch and how it will impact Canadians, Nixon of RBC speaks about the impacts on consumers. 

Credit crunch fallout will cast a long shadow

The consensus of the big brains? The credit market is stabilizing, finally. But the after-effects of the Great Debt Squeeze will linger. (And by the way, they’ll probably hit your wallet, if they haven’t already.) No one was more pointed about this than Mr. Nixon, who called it the most severe financial crisis since the Great Depression and used the word “bubble” to describe the period of shrinking credit spreads and risk-taking that peaked in the first half of 2007. Here’s the thing about bubbles: Excessive enthusiasm is almost always followed by excessive pessimism when it finally bursts. Recovery to “normal” always takes longer than you think. Ask anyone who bought into the Nasdaq in 1999

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That means the banks’ own cost of money is likely to stay high. The credit crunch was a useful reminder to bankers of the value of a large, stable base of retail deposits. The institutions that failed – Northern Rock and Bear Stearns – didn’t have it. Everyone else wants it and they’re going to have to pay for it. That could work to savers’ advantage, but for borrowers, it’s nothing but grim news. The banks will pass on their elevated funding costs to the customers.

“I do think it’s a long-term phenomenon … perhaps until the next bubble occurs,” Mr. Nixon said.