Thursday, March 13, 2008
Global Credit Crunch
The credit crunch caused by the mortgage fiasco in the United States is now truly a global phenomenon. The Bank of Canada announced yesterday that they will be injecting $4 billion in an attempt to ease some of the liquidity issues caused by the mess south of the border. During the same period a credit infusion will also be offered by the Federal Reserve, the Bank of England, the European Central Bank and the Swiss National Bank. It may be too little too late however at this stage in the game what other reasonable options are there? The bottom line is more liquidity is required to allow financial institutions to continue doing business. At this point the only other alternative would be to force the financial sector to liquidate its rotten assets and wipe out the leverage which would cause many of them to go bankrupt. That would be a lose-lose for everyone.