I have read an article called "Stocks have shrugged off the banking turmoil. Haven’t they?" in The Economist newspaper, but I find it hard to understand the meaning of a sentence. The sentence is
A credit crunch will crimp economic growth and therefore profits.
Context of the sentence:
Bank failures are usually bad for business. A sickly banking system will lend less and at higher interest rates to companies in need of capital. A credit crunch will crimp economic growth and therefore profits. On occasion, a bad bank can blow up the financial system, causing a cascade of pain. Investors know this. They have dumped stocks when banks have failed before.
Which option below correctly represents the meaning of the aforementioned sentence?
- The credit crunch will crimp economic growth, as a result, the credit crunch will crimp profits.
- The credit crunch will crimp economic growth, for that reason, the credit crunch will bring profits.