Credit disaster proves to be an economic threat
March 4, 2008
What a year ago was just one amongst many other problems has now become one of the most serious threats to the economy of the USA. On the 2nd of March a group of experts got together to come to the alarming conclusion that the credit crisis that is occurring in the country is becoming a huge threat to the nation’s economy. In fact many economists are of the view that this is the gravest risk the economy is facing now.
The results of the survey which was conducted by the associates of the National Association for Business Economics would come out on the 3rd of March. The overwhelming thing that caught the attention of many is that, 34 percent of the total number of economists who participated in the meeting was of the view that ranked the turbulences in the financial market out of loan defaults as the number one threat to the country for the coming two years.
The rise in opinion is by almost double. The last time the survey was conducted in the month of August the percentage of economists who had ranked a credit crisis as the prime threat was only 18 percent. At that point of time 20 percent of the economist saw the rising terrorism and conflicts of the Middle East as the gravest threat.
The interesting thing, and a rather alarming thing, to note here is that one year ago the risks of credit crisis were not even considered as a considerable threat. The fact that it has risen to the number one spot in this relatively small time period shows how grave the situation is. The recent survey which was conducted found out that almost 18 percent of the members pointed out to massive debts which are held by the businesses and households as the main problem right now.
The survey was conducted by questioning 259 economists from across the country. It was conducted in the first 14 days of February. As a result of the various other things that have happened since then the credit crisis have been highly underscored.
On the 29th of February the INDU (Dow Jones industrial average) took a dive by 315.79 points. The main reason for this steep decline was because of the number of disheartening economic reports that had come in during the week. One of the economic data that came in was from the UBS Securities which said that losses that the financial system would have to suffer from those securities are backed by mortgages and other such debts which would equal to almost $600 billion. This figure was a lot more than what the economists had projected till then. The previous prediction the economists had made was that the total was going to come up to $400 billion.
The main problem behind the credit crisis is the securities which are backed by different sub prime mortgages. Most of these people defaulted on their loans as a result of the crash which the housing market took.