Credit is the life-blood of an economy. Even the best-run business or household sometimes needs access to credit. Sellers of big-ticket items like homes, vehicles and furniture often need credit for their customers.

One of the big – and controversial – economic issues today is the lack of credit. Credit availability contracted during 2008 and 2009, the worst years of the recession.

But after the typical recession, lending usually rebounds. But not so this time. Although credit conditions were better in 2010 than in the previous two years, credit growth still only was one-third the rate as after the 2001 recession.

So why does credit remain so tight? A number of reasons have been offered.

First is that few households and businesses want or have the capability to acquire loans. Households have been busy paying down the record debt levels they posted a decade ago. They also are limiting their spending and building up their savings.

Since households have turned frugal, businesses have cut their spending plans, curtailing their need for loans.

Another reason has to do with the “credit pendulum” perhaps moving too far the other way. This refers to the cycle normally seen in credit availability. During good economic times, making loan payments is easier. Lenders are motivated to lower standards and extend credit to more households and businesses.

When recessions hit, lending attitudes move in the opposite direction. As a result, fewer households and businesses can qualify for loans.

The Dodd-Frank financial re-regulation bill passed by Congress also has come under fire for setting financial standards for lenders – in the opinion of some – too high. Plus, with three-fourths of the implementing regulations of Dodd-Frank yet to be written, lenders still aren’t certain what rules they will have to follow. In the face of uncertainty, the general rule is be cautious.

Last, there’s the impact of the Federal Reserve, which has power over the quantity and price of credit. The Fed certainly has done its part in increasing the availability of credit, having more than doubled the supply since late 2008. Yet the majority of this new credit sits in the vaults of banks as “excess reserves.”

Why? Going back to the first point, some say it’s due to a lack of demand by credit-worthy borrowers. Others say it’s a result of the Fed policy actually paying a 0.25 percent annual interest rate to banks on their excess reserves. While a low rate, it is risk-free, and some think banks are quite happy to earn this guaranteed return in uncertain times.

So we have a chicken-and-egg question: Is lending tight because there are few good loans to be made or due to too-tight regulations and an overly generous Fed?

Dr. Mike Walden is a William Neal Reynolds Professor and N.C. Cooperative Extension economist in the Department of Agricultural and Resource Economics at N.C. State University.