The US slowdown – finally a pain shared…with everyone but OPEC
Monday, May 12th, 2008Couched in the new terminology of decoupling versus recoupling whether the old aphorism “when the US sneezes, the world catches a cold” holds this time or not has been the subject of much debate. Growth in the rest of the world has so far seemed resilient in the face of the US credit crunch and economic slowdown but could it be that we are now at the tipping point where the US is beginning to share its pain with others? On a financial basis the US credit crunch is already well shared. The US economic expansion of this decade was supported by significant external borrowing so it was inevitable that foreign financial institutions would take some of the hit. Losses by European banks in fact equal those of their American counterparts. Of the $323 billion in losses incurred by global banks to date $152.2 billion of it has been borne by European banks and $152.5 billion by American banks. Asian banks have been relatively unscathed with just over $18 billion in losses (source: Bloomberg page WDCI).




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