Let me warn you. If you don't like bad news then pass on reading this article.
The IMF Issued a comprehensive report on the financial state of world economies. The report, which was carefully researched, is full of gloomy findings that may shake you up a bit. Even with massive stimulus efforts worldwide, world economies still face major hurdles. Here are some highlights of the IMF report:
- Global financial institutions face a total of $4.1 trillion in loan losses and other assets.
- The IMF estimates that the US would write down $2.7 trillion in losses up from $2.1 trillion previously estimated.
- Including Japan and Europe write downs are expected to reach $4.1 trillion. Banks will bear 2/3 of these losses with the rest coming from hedge funds, insurance companies and pension funds.
- Even emerging markets are not spared. Refinancing needs will amount to about $1.8 trillion for these economies.
In order to maintain the 4% ratio (tangible common equity to tangible assets), the US needs capital injections of $275 billion , Europe $375 billion and UK banks $125 billion.
The IMF is calling current efforts at cleaning up the banking mess piecemeal and wants to see bolder action on the part of governments. Here is a very significant quote: "The current inability to attract private money suggests that the crisis has deepened to the point where governments need to take bolder steps and not shrink from capital injections in the form of common shares, even if it means taking a majority or even complete control of institutions." Why is this quote so important? It seems that US Treasury Secretary Geithner is sounding the all clear for most US banks, in direct contradiction to the IMF report.
The IMF estimated that the US has taken about half of its write downs and Europe has taken only 1/5th of their write downs.
The report concluded that the credit crisis will be "deep and long lasting" predicting that economies will continue contracting for a number of years. So ends this page of gloom.
Do you believe that we more of the financial crisis to come?
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Reader Comments (Page 1 of 1)
4-22-2009 @ 5:26PM
Iridium said...
IN short, yes.
The banks are still holding trillions off the books. Sort of acting like the losses aren't even there. That ignoring the CDS market will make it go away.
The banks were able to show profit through accounting gimmicks and massive government bailout funds. That can only last for a quarter. Sooner or later they have to take the massive losses.
I firmly believe the rally of the past few weeks has been completly manipulated by major market players in order to generate the opportunity to steal as much money as possible before the true collapse. By driving shares up from lows anyone who got in early stands to make a lot of money off a huge selloff.
The global financial system has collapsed. The total loss can not be prevented. The government bailouts were like a last round of chemo to keep the paitient alive a few months longer. Just look at GM. The bailout was used so they could pay out bonuses and pay off a few contracts. The company was going to go bankrupt anyway, it was just stalled.
The only way to move the economy forward again wil be to create a whole lot of money out of thin air. The past 20 years of growth has been built on phantom money that never existed. The tech bubble, housing bubble, and commodity bubble was all that created wealth. Strong job creation and real wages had nothing to do with it.
I never understood how you could have this massive increase in the economy at the same time wages and purchasing power was stagnating. The answer was that it was all fake.
4-22-2009 @ 6:39PM
al coholic said...
You are dead on, Iridium....virtually the entire cosumer spending spree was paid for with home equity money, which was created by bogus appraised values.
Now that the real estate bubble has burst and values have plumetted, we can expect round #2. Commercial property will follow suit and deflate..
And as people have recently discovered they cannot pay their monthly bills with their credit cards anymore, now that their credit limits have been reduced.
Looks to me like checkmate for the American dream.
4-22-2009 @ 10:20PM
clikdawg said...
This explains why China and India think they can "require" the IMF to sell its gold (and much of its remaining credibility); da bitch is broke, busted, flat, and has to start parting with daddy's keepsake watch and grandma's silver service (so to speak).
They're spendin' it, gamblin' it, and losin' it even faster than they can extort it from Western taxpayers, and here comes the repo man with an inscrutable Oriental gleam in his eye ...
While we've been gassin' 'bout how to "contain" Red China, they've been studyin' and implementin' ways of keeping the US and its partners in crime from going down the drain TOO quickly -- they got the ball, the lead, and the wind in their favor: Like Iridium was sorta sayin' the other day -- ballgame, sports fans ...