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THE CURRENT US FINANCIAL MARKET CRISIS AND THE GLOBAL MARKET
THE CURRENT US FINANCIAL MARKET CRISIS AND THE GLOBAL MARKET
The US financial market crisis that erupted last August 2007 has developed into one of the biggest financial shocks and its effects have continued to reverberate. Although the financial turmoil grew in a relatively small part of the U.S financial market, it spread across the Atlantic quickly as well as across other parts of the financial markets in ways not anticipated, imposing damage on institutions and markets that are at the global financial system’s core. The fallout spread quickly to curtail in the inter-bank money market’s liquidity which is the center of the financial system.
Since then the strains on the credit market have intensified, with a widening range of markets coming in under pressure. With the rising of bank losses estimates and continuing worries on counterparty risk, concerns were increasing about infection to other often apparently unrelated markets. Although there have been some successful accomplishments in alleviating pressures, and strains on liquidity have moderated in inter-banks which reflected the coordinated and aggressive actions of major central banks, nevertheless, there is still the financial market’s risk of intensifying further. The rising spreads have led to banks continuous mark-to-market losses on their debt securities holdings. The credit cost seems to have significantly increased particularly for higher-risk consumers and corporations, as prospects in growth have been marked down. Equity markets valuations similarly have come under pressure across advanced economies, with the shares of the financial sector in parti ...