No Relief For Global Credit Crisis
An article published by the British-based paper, The Guardian, talks about how the global credit crisis is intensifying. According to the article:
The crisis in the global credit market intensified today, pulling stock markets lower, as a US investment fund became the latest victim of the rout sparked by the plunge in the value of American sub-prime mortgages.
The credit crisis was sparked by escalating levels of bad debt among American mortgage lenders as home owners defaulted on their loans. Defaults have been particularly severe in the sub-prime mortgage market, where borrowers tend to be low-income or high credit risk households.
The collapse in the value of sub-prime loans caused panic among traders of commercial paper who feared the value of the assets on which their investment was based, would plunge. As a result the market for commercial paper dried up, causing the CDO investment vehicles to run out of cash.
The U.S. financial system has found itself in a downward spiral, and it’s taking the rest of the world down with it. Factors seem to intensify each other, which in turn heightens the effects of the crisis as everyone fails to get out of debt. It is a frightening thought that financial problems spread from one economy to another like a disease. Now the dilemma is finding a cure before it brings a worldwide collapse.
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