Global Financial Crisis bites hard in Europe, Asia & US
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The global financial crisis continues to bite hard around the world as more bad news is reported each day throughout Europe, US and Asia.
To give an idea how bad things are Wachovia, the big US bank unveiled a US $23.9 billion third quarter loss after writing down US $18.7 billion in goodwill and US $6.6 billion in credit losses.
Wachovia also projected an additional US $26.1 billion in mortgage related losses in 2009. Wachovia is currently preparing to be taken over by Wells Fargo.
Meanwhile, in Europe Hungary increased it’s interest rtes by 3 per cent to 11.5% to maintain it’s peg to the Euro currency. This is likely to continue throughout Eastern Europe to stem capital outflows.
This has followed heavy selling across currencies such as Russia, Turkey, India, Argentina etc. The currency sell-off has affected virtually every currency in the world including heavyweights the Yen, Euro and Pound as all currencies have depreciated against the USD.
The Yen carry-trade which has financed so much of the global investment binge has the hedge funds has started to be unwound as funds have deserted the Yen for the safety of the USD.
The contagion that is inflicting the world has definately impacted Australia with the sharemarket today hitting four year lows as the All Ordinaries fell under 4000 again. The AUD has also fallen heavily from near parity to below 65c since July.
It should be noted that while Australia has felt some pain it is nothing compared to some other countries around the world and it is hard to realise if most people realise still how lucky and insulated we have been.
At this stage it is up in the air how well Australia will survive in 2009. I suspect the bad times have only just begun should China not be able to quickly re-establish momentum in their economy.
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