Here is an article to warm the cockles of everyone's heart:
biz.yahoo.com
An excerpt:
And the fears of another ticking timebomb a la LTCM will add to that reluctance to lend, fuelling an already critical credit squeeze in
those parts of the world worst affected by this global financial crisis.
''Banks will begin to look (more warily) at hedge funds again and we'll have a contraction in global liquidity. We were going to have
that anyway, but this will speed it up,'' said another strategist, who declined to be identified.
Andy Xie, economist at Morgan Stanley Dean Witter, estimates at least 20 percent of $380 billion in total foreign loans to Asia will go
bad, and Europe is especially exposed.
So far, banks are rolling over foreign debt and refusing to accept writedowns, but soon writedowns will become inevitable.
''These companies just cannot pay back these loans,'' Xie told Reuters Television. ''As soon as you recognise this, that you are not
going to be paid back, you have to write it down. It will take a huge bite out of your capital.''
But the unnamed strategist argued that while credit will certainly become even more scarce in Asia, this region now has less to lose
than other regions and could, therefore, benefit.
''Bizarrely, Asia one of better places to be because how can you contract credit any further here? We don't even have a banking
system,'' he said. ''The only thing that can happen from here is to rebuild capital and the lending process from here.''
Using Bank for International Settlement figures, this strategist estimated that the world's biggest banks lent more than 129 percent of
their capital to global emerging markets, and so far about 30 percent of those loans are non-performing.
''If it's 30 percent, we've just wiped out half the world's bank capital,'' he said, to stress the severity of the impending credit crunch. |
