The market is crashing.. What did you expect? At this moment there are many reasons for the markets to collapse. May be we don’t want to realize it but it is just right in front of us. The real economy will suffer. The next thing that one should expect now is that debt coming from shipping companies will not be repaid and that banks that are heavily exposed to the emerging markets, and do not have a well established network, will face major loses.
The situation in the Shipping industry is really bad. One after the other, shipping companies shut down and things are about to get worse as the global economic slowdown really affects the world demand for commodities. The Inflows will diminish and the losses will increase dramatically. Hence, banks will not be paid for their shipping loans and will have to write them off or sell them with major loses.
On the emerging markets front now, unfortunately things are about to get even worse. The local currencies have declined against the US$ and the Euro, there is no liquidity in the market and on the top of that people are afraid of the banking system and they massively withdraw their savings. The funding gaps that will be created will be disastrous and the mother companies either will pay a high price to cover them or they will not cover them at all! The picture gets even more complicated if we add the fact that banks are not in position to borrow/lend money in the interbank market. Moreover the government intervention is not going to help, to this end, as it is not very likely that the governments will allow the banks to take risks and grow with its money.
We should realize that companies do not face losses.. they just try to survive under the destroy of capital. Finance returns to its roots and a new banking era starts.. In any case, in the long run banks will survive and will bring reality to their standards- not their standards to reality. After all, banking is the second ancient profession!
The situation in the Shipping industry is really bad. One after the other, shipping companies shut down and things are about to get worse as the global economic slowdown really affects the world demand for commodities. The Inflows will diminish and the losses will increase dramatically. Hence, banks will not be paid for their shipping loans and will have to write them off or sell them with major loses.
On the emerging markets front now, unfortunately things are about to get even worse. The local currencies have declined against the US$ and the Euro, there is no liquidity in the market and on the top of that people are afraid of the banking system and they massively withdraw their savings. The funding gaps that will be created will be disastrous and the mother companies either will pay a high price to cover them or they will not cover them at all! The picture gets even more complicated if we add the fact that banks are not in position to borrow/lend money in the interbank market. Moreover the government intervention is not going to help, to this end, as it is not very likely that the governments will allow the banks to take risks and grow with its money.
We should realize that companies do not face losses.. they just try to survive under the destroy of capital. Finance returns to its roots and a new banking era starts.. In any case, in the long run banks will survive and will bring reality to their standards- not their standards to reality. After all, banking is the second ancient profession!
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