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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: stan_hughes who wrote (1113)	9/25/2007 5:35:51 AM
From: saveslivesbyday	Read Replies (1) \| Respond to of 71452

"I'm now questioning whether we will get a so-called meltdown" An immediate "mark to reality" would be catastrophic for the world's financial systems, and I agree the Fed, or for that matter all of the world's central banks simply wouldn't let that happen. It seems to me events in the financial world are fairly well buffered, so instead of a sharp meltdown, we're likely in the midst of a long, drawn out unwinding or "rebalancing" as some have called it. Things usually don't seem to resolve as abruptly and violently as the bearish view might expect, but rather in slow motion, with adjustments along the way.

To: stan_hughes who wrote (1113)	9/25/2007 9:07:00 AM
From: ldo79	Respond to of 71452

Patience! <if the credit rating agencies haven't triggered one by now having already downgraded the worst of the CDOs, it seems unlikely to occur at this point IMO> ============= US subprime crisis seen to worsen, heighten risks By Doris Dumlao September 24, 2007 MANILA, Philippines – The International Monetary Fund has warned that the US subprime mortgage crisis could drag on, at least through 2008, and possibly expose emerging markets to greater risks, as credit and market discipline in global markets continue to weaken. In its Global Financial Stability Report, the IMF said financial risks had increased and underlying conditions worsened since its last assessment in April, when it discussed the rising deterioration in US subprime mortgage credit, or loans given to borrowers with imperfect credit history and little equity. "The period ahead may be difficult, as bouts of turbulence are likely to recur and the adjustment process will take some time," the IMF said in the new report. "Uncertainty about the final size of losses, and when and where they will be revealed, will likely continue to keep market sentiment and conditions unsettled in the near term." The current crisis is largely attributed to lax credit underwriting standards, as well as unfavorable employment trends in the world's biggest economy. "Regardless of whether collateral quality improves, the effects of previous excesses are likely to continue at least through 2008," the IMF said. While potential losses appeared manageable, and banks are well capitalized to weather more severe stress, the IMF cited considerable uncertainty regarding the magnitude and distribution of losses stemming from the turmoil in credit markets and their possible impact on broader financial stability. Reflecting a weakening in credit discipline that emerged along with the growth in credit, the IMF said private sector borrowers in certain emerging markets were adopting relatively risky strategies to raise financing, thus increasing their exposure to volatility. The IMF noted that in some countries in Eastern Europe and Central Asia, for instance, banks were increasingly using capital market financing to help finance credit growth. "Banks that rely predominantly on bond financing are more vulnerable to a sudden drop in demand for bonds--either due to a rise in domestic loan defaults or an increase in global risk aversion--triggering funding difficulties for the banks," the IMF said. Lower-rated banks are at risk if appetite from international investors suddenly declines, potentially raising the systemic risks for some banking systems, it stressed. International banks are often unwilling to lend to such banks through the interbank market, owing to the difficulty in assessing their true financial condition. But these same banks can still issue international bonds, though the risk is reflected in wider spreads, the Fund explained. The IMF said governments must thus ensure that such vulnerabilities would not build to more systemic levels. In addition to currency risk, the IMF said emerging markets had also grown more vulnerable to a rise in volatility. tinyurl.com