I just read this article, and I think it does a pretty good job of explaining the financial crisis up to now, and also what is currently ‘brewing’ in the background (which might actually come true depending which way the world decides to turn)
I think the world needs to prepare themselves for another shock as more companies are being dried up of credit (ie. loans) Obvious things will become worse:
- Cut backs on any business expansions
- They will be forced to fire more staff
- Leading to mortgage defaults
- Meaning more bad debts, and tighter credit
- The loop continues…
Until now, Australia has been very sheltered from a lot of this financial crisis. As the financial crisis drags out and becomes worse, people are starting to hear that the mining/resource/oil/gas industry are scaling back their operations, which then leads to redundancies across their workforce.
At the same time, Australian banks are most probably preparing themselves for Babcock and Brown to go under after their trading halt got extended for another week. It’s not that pretty when it starts affecting your backyard, and this is what we’re starting to see. It’s happened so fast, and most people are not prepared for it.
So watch your back pocket, and if possible, borrow as much as possible for a buffer just in case the worse is yet to come.
The financial crisis has morphed into several simultaneous crises that feed upon each other. The real estate bust crippled the banks. Crippled banks starved companies of credit. Starved companies laid workers off. Laid-off workers defaulted on mortgages, deepening the bust in real estate. By a similar process, crippled financial institutions stopped making auto loans, which caused people to stop buying cars, which pushed the carmakers to the brink. If the carmakers go down, a whole new round of job losses and mortgage defaults will slam into the financial system – Source
Tags: crisis, economy, financial crisis, subprime