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The coming depression blog | June 24, 2018

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Financial Crisis in USA

The U.S. financial crisis is spreading to the whole world; stock Exchanges soon went into a panic going southwards – worldwide. This news has been commented upon by several analysts, former governors and commentator’s residents of multi-channel television. Starting at dissecting the news, the first question is to understand the crisis in the USA. American banks are in crisis when people who had taken out loans for housing (among other types of loans), left or began to have difficulties in coping with the debt service. Banks to facilitate access to credit will lower the spread. This percentage includes a portion that can cover the risk of uncollectible amounts of loans and other banking services, which have been shrinking throughout the developing World Bank as the risk is too high.

To add to this the banks have business relationships with each other, they have to sell loans to each other as a way to get cash quickly, so it is easy for the crisis to spread around the world. When the news that banks had difficulties in collecting credit was out, depositors rushed to get their economies with the fear of losing their money. Then the banks had to resort to borrowing to meet its commitments. It was then that there was a need for the intervention of the Fed injecting money into the market to maintain the solvency of banks. The European Central Bank injected liquidity into the market, to avoid a major crisis and to avoid the collapse of the banking system, not avoiding the drop in major stock indices at the stock exchange because agents behave “nervously”, leading them to crumble paper and transferring their capital to safer investments such as term deposits or gold, whose price has not stopped increasing.
In Portugal this crisis will not occur, at least in the same way as these are rare cases in which commercial banks sell loans to other banks, also rare situations in which Portuguese banks have loans of U.S. banks. However the crisis comes to Portugal through cuts in the U.S. Dollar against the Euro, which made exports to outside the EU, since most of the transactions are in U.S. dollars. Another sign of crisis which increased at this time was to increase rescue fund. It is expected that domestic commercial banks hinders access to credit to avoid a similar crisis in Portugal. As Portugal’s economy is very open to the outside, it may suffer a lot with a large-scale crisis in the USA, hopefully this does not happen because then I never would see our GDP closer to the rest of the EU.

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