The Idiot's Guide to Bank Losses

Bank losses are like death wishes. If you are a proprietor, who relies business funding on bank loans, starvation days may not be far out. Bank losses pilot a crisis called credit crunch that eats up your investments, freezes your financing accounts, and leads you to bankruptcy at times.

The predilection that was not predicted, American banks leading massive losses, has created a hurly burly in the financial markets all over the world. Why would anyone even think that superpower US would acquire a large break in their financial system? But it happened.

American banks like the Citigroup, Wachovia, and Bank of America have all announced disturbing billion dollars of losses. That is why concerned investors have argued if breaking up the financial conglomeration system would help save the industry; and they were right about the concept. Similar damaging losses have resulted to Europes UBS AG : Swiss Bank Corp. and Union Bank of Switzerland : into settling for a break-up in their business model. Yet, global bank creators, Citigroup, HSBC Holdings, and JPMorgan Chase, have stood by its belief that they would be able to survive the crisis on different business set-ups. Still, the inevitable nightmare has come to slam them against the wall.

Other banks, who have declared similar and major financial outbreak, were Japanese banks, Australian banks, British banks, and German banks. Japanese banks were the Long-Term Credit Bank, Industrial Bank of Japan Ltd., and Sanwa Bank Ltd. A British bank has also made a history-breaking loss, the Royal Bank of Scotland.

How have bank losses and credit crunch affected the world economy then? Well, let me start by telling you that, if a credit crunch occurs, there is an immediate shortage of cash flow or funding for loans and investments. The effects on the whole economy have not been that wild though; effects have been seen as limited to particular areas of the financial markets like the real estate industry.

A Federal Reserve reaction to credit crunch have stated that only some regions have been affected when it comes to the businesses of manufacturing, furniture, and automobile. Meanwhile, retail sales and even the job front have remained unscarred and gained positive results. Price inflation was not even much of a problem, because there were only low pressures for the public to notice.

It was the market of housing loans that have taken the greatest toll from the crisis. Banks have imposed more restrictions on lending regulations, making it harder for people to get thru those much-needed residential mortgages. But what happens if the credit line is tightened? As the life blood of the economy malfunctions, so are the business and businessmen, resorting to a collective spend-and-invest-less resolution. Worst, some may result to foreclosures due to late or impossible payments.

Whilst everyone associated with the economy of US have experienced successive blows in their financial markets, those countries that did not have any relevant economic relation with the US, like Morocco and India, have acquired protection from the crisis. According to international publications and investment companies, Brazil is also sheltered from the economic fall of US and other associated countries. Even the powerful Gulf countries like the United Arab Emirates is keeping a stable financial flow because the fact is they are actually providing a net flow of credit and savings all throughout the world.

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