Has Credit Crisis one more year to go?
August 25th, 2008 by ALVIN SOONG
1. Rising cost and reduced availability of credit
2. Damaged balance sheets in world’s largest investment banks (falling house prices reduce equity value-house value less mortgage) of homes, hurting ordinary consumption in richer courntires
3. De-leveraging /reducing debt levels in banks (selling off assets to pay off devts) in banks, companies and funds.
4. Bursting economy and commodity bubbles
5. Adjustment to higher energy costs to lower cost sources
6. Contradictory, damaging policy actions. Policy to counter economic slowdown is constrained by simultaneous need to combat higher inflation.
Implications: Credit has been tightening, pol and raw material prices increase, house prices edging down but not collapsing. OECD lead indicators show 6-9 months ahead of economy shows negative. Conclusion is to stay disciplined and risk adverse.
Extract and summarized from The Edge 11 Aug 2008
