LYNN ? Spend less. Save more. Build liquidity. Donate what you can. Ask for help.Those are the deceptively simple tenets espoused by Eastern Bank President Richard E. Holbrook during a presentation at the quarterly meeting of the Lynn Business Partnership last week.Holbrook explained the anatomy of the nation’s credit crunch and soured economy in simple terms, encased in a talk entitled “Once in a Lifetime: A Perspective on the Current Economic Crisis.”The bank president divided his explanation into two parts ? how the economy tanked and what people can do about it.In Part I, the period of expansion, credit and leverage grew rapidly over several decades, creating a liquidity that supported economic growth. An excess of liquidity stimulated inflation in various asset classes, such as housing.These inflated asset values supported further expansion of credit. This trend was followed by mortgage equity withdrawals, which, as Holbrook put it, “keeps the good times rolling.”People used the equity in their fast-appreciating homes to buy additional property or, in many cases, luxury items. In fact, consumer spending surged past 70 percent of the gross national product.Amid those rosy times, lending standards and regulations were relaxed as lenders and creditors embraced a belief that house prices can only increase. Credit default swaps facilitated continued expansion of leverage extreme levels, Holbrook said.Part II brought less favorable circumstances. House prices reached unsustainable levels and began to decline. Mortgage equity withdrawals were less prevalent and mortgage defaults began to rise.As prices declined and defaults accelerated, the economy slowed down. The weaker financial institutions failed and finance stocks brought the market lower. A mood of risk-aversion took over. Credit markets became frozen and major financial institutions began to fail as the liquidity problem morphed into a solvency crisis.In such times, stock markets crash and governments and central banks intervene on a massive scale. “These are unprecedented times, and nobody knows how things will turn out,” Holbrook said.Remedies are clearly needed. According to Holbrook, they include restoration of market confidence, an orderly valuation of assets, de-leveraging and re-capitalization, reduced consumption, and the stabilization of house prices.So what’s next?Most likely the economy will see increased regulation, wider federal deficits, higher taxes, higher borrowing costs, lower economic growth and uThe recession will continue through 2009 or longer, with increased unemployment, further decline of housing prices, an acceleration and spread of losses, and many more bank failures.But not all is lost, he said, noting that people can spend less, save more, build liquidity once again, donate whatever possible, and ask for help.