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The American credit crunch due to increasing risk in debt and the collapse of the American housing market is now spreading into other areas of the world. American financial firms like Lehman, Bear Stearns, Citigroup and JPMorgan are declining in value as investors pull out their money and Goldman Sachs lowers their investment ratings. These companies have been hit hard and their lack of profitability is beginning to affect foreign nations. Moszkowski from Goldman Sachs says “Slower debt, mergers and acquisitions and equity- underwriting businesses seem inevitable”. Companies that have diversified their investments away from debt are most likely to survive in this poor environment. Many large investment firms have seen a decline of 30% in their value. Since the U.S. is one of the world’s largest importers the effects of the credit crunch and rising interest rates is making it difficult for many of these importers and businesses to use credit to finance purchases. Therefore, fewer imports mean hampered manufacturing and jobs overseas. Interest rates, stock prices, lack of credit profit, availability of credit and the dollars value has been propping up the growth of the U.S. in the past decade. This is all about to end as imports from other countries begin to decline as a direct result of companies’ inability to take future credit declines. A spiraling affect is beginning to happen. Consider Canada the risks facing Canada. Ryan Brecht from Action Economics in Canada states, “The main source of downside risk to Canada's economy from the sub prime contagion is via the U.S., as any substantial impact on the U.S. real economy would work its way north in the form of a reduction in demand for Canadian goods and services." This reduction of demand for products in other countries could cause some businesses to have sales declines which could cause them to default on loans. As loans default interest rates begin to rise and in turn credit becomes scarcer in these countries as well. This is similar to what happened during the Great Depression. However, it is unlikely that such a Great Depression will be realized again due to the sub-prime crisis. The effects of the sub-prime bust will likely work itself out of the economy’s bloodline over the next six months. In addition, even though the U.S. has a sluggish growth rate many major worldwide economic blocks like Asia, China and the European Union have been experiencing high growth periods. A small reduction in their growth rates isn’t likely to create panic. Murad Ali, a two-time published author, writes articles and offers advertisement space for businesses. Visit http://www.blogpublishingandmarketing.com and http://www.thenewbusinessworld.blogspot.com and http://www.datingdesires.blogspot.com and http://www.fitnessanddietblog.blogspot.com and http://www.marketing-masters.blogspot.com
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credit crunch, decling credit, financial markets, globalization, world effect,
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