The IMF, or International Monetary Fund, recently announced that the worldwide financial situation relating to the global credit crisis is worsening. The results of the dangerously high default rates on subprime mortgage in the United States are having more and more far-reaching consequences, far beyond America.
The problem is that the American subprime credit crisis has ‘contaminated’ other markets. There has been a ripple effect, and there are now fewer and fewer loans for businesses and consumers. The American housing market has gone downhill as well, and now there are too many homes and not enough buyers.
This, in turn, has damaged financial markets, first in American, and then across the globe. Many lenders have been made to go bankrupt, due to the decrease of the value of assets and defaults on mortgage payments. Some financial institutions have had to merge in order to weather the blows the economy has suffered. The CEOs of Merrill Lynch and Citigroup, both of which companies are big players in the global financial market, have even had to resign in November of 2007.
The IMF says has enumerated three problems that financial markets all over the world are facing right now. First, financial institutions are not making enough profits by selling assets, often losing more money than they gain. Second – and this is related to the first problem – the prices of assets keep going down. Third and finally, global economic growth is decreasing. Many countries’ economies are evincing reduced GDP growth or even are undergoing full-fledged recession.
All in all, the world’s leading financial institutions have lost a significant amount of their capital. They need to either regain capital or take lower risks, which means stop buying as many assets. Thus, the world’s financial position is highly unstable. In short, the world’s immediate macroeconomic future looks bleak.
Recent additions:
- End Of The Credit Crunch?
- Resist the Urge to Pay Taxes with Credit Cards
- Bankruptcies Increase By 38% Last Year
- Financial Experts Recommend Lowering Interest Rates
- Financial Experts Recommend Boosting Savings
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