Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Credit Crisis Phase II - The Economic Crunch

Economics / Credit Crisis 2008 Sep 06, 2008 - 02:02 AM GMT

By: Nadeem_Walayat

Economics Best Financial Markets Analysis ArticleThe credit crisis having manifested itself most evidently during the past 12 months through the continuing tightening in the availability of credit to all sectors of the economy despite government and central bank actions of pumping hundreds of billions of dollars if not more than $1 trillion into the financial system so as to prevent a chain reaction of bank failures as the worlds big banks continue to announce ever larger bad debt provisions each and every quarter.


The latest economic data now confirms that the the credit crisis is having a serious impact on the major western economies all of whom are now fast tipping into recession, with the momentum of economic contraction feeding in on itself as the chain reaction of contraction in one sector impacts on to the next sector and so on cycling back around as every sector of the economy follows the financial and housing sectors into recession.

The expected tendency would be to expect the first sector to be hit hardest to be the first to recover, therefore an end to the crisis will be first seen within the financial sector, the core problems of which relate initially to the US housing market backed derivatives that magnified exposure to the market by in some cases as much as 30X the amount risked. Whilst the world enjoyed a credit boom this brought huge profitability to the banks, however derivatives being an over the counter market, i.e. without any regulated market place, the mark to market methodology deployed to boost valuations hence profits were akin to plucking figures out of thin air. This started to come to a head 12 months ago when the big banks suddenly both a) stopped trading the assets between themselves due to the dubious valuations and b) were not prepared to risk further lending to other institutions where the risks were now un quantifiable as to whether they would be repaid or not, hence the interbank credit freeze and the delveraging of the estimated $500 trillion (BIS) global derivatives market began

The US housing market is far from bottoming, my existing forecast suggests that the US housing market will not bottom until late 2010, for at least another 2 years, therefore the position of the big banks will continue to deteriorate and so will the state of the economies which will lag any bottom in the housing markets, hence this suggests at least the next 2 years will be economically tough and on par with what could be termed as a soft depression, depressions tend to be highly deflationary which is what we have been witnessing as asset prices contract literally across the board from housing to stocks and finally to commodities.

INO Frree Trading Seminars TV

The following articles continue to expand on the impact of the credit crisis on the worlds economies and asset prices as politicians such as Britain's Chancellor of the Exchequer Alistair Darling " Economic times are arguably the worst they've been in 60 years… I think it's going to be more profound and long-lasting than people thought ", prepare the populous for a recession.

For the rest of this article please subscribe to our FREE newsletter.

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-08 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 150 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in