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Global Impact Of The Credit Crunch

[Jun 4, 2008.]


While America seems to be taking the brunt force of a weakening economy, a drastic credit crunch, and a faulting house market, the nation is certainly not alone in feeling the effects. Economies world wide are reporting losses caused by the drop in the United States dollar. While consumers and lenders are well aware of their own financial difficulties as credit rates rise and with foreclosures becoming an all too common event, the fact is that the United States is having a significant impact upon other economies the world over.

The International Monetary Fund has recently released number estimating the world wide effect of the credit crunch. The numbers show a $945 billion dollar loss on a global scale over the next two years. While this number is just an estimated amount over a projected period of time, it is still surprising and even alarming to most in the financial sectors. While global economies and several institutions based in the United Sates are proving too resilient, the International Monetary Fund predicts that the worst is not over just yet and that consumers and investors should prepare for a continual weakening of the economy.

Along with the initial number, the International Monetary Fund estimated that the housing market alone can see losses as high as $565 billion; this is taking in the increasing foreclosures and the estimated increase in sub prime adjustable interest in the coming year.

The International Monetary Fund expects to see additional losses in other areas of the financial scope which do not necessarily have something to do with the housing market. Loans that are tied in with credit cards can be expected to see additional losses along with commercial real estate.

The cause for the global impact of the weakening U.S economy seems to be due, in part to weaknesses that were preexisting.

“It is now clear that the current turmoil is more than simply a liquidity event, reflecting deep seated balance sheet fragilities and weak capital bases..” stated the International Monetary Fund.


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