How bad is the economy?
Three years into the global financial crisis and the economic solutions still appear vague. According to economists, there are indications of a huge contraction in private credit. No one is making enough loans and investments to expand or start businesses and get the economy growing. There are stories of bad debts, shaky banks, floundering businesses, people losing their homes, rising unemployment and currency wars, but the correct reasons of the causes still remain an enigma.
The major reason for this uncertainty is the absence of correct facts and numbers. Analysts ask many questions, like how can anyone be comfortable extending loans if balance sheets do not signal all the facts? How can those who hold the assets and the risks cannot be located easily? How do you know which banks and countries are solvent, if you cannot determine how many toxic assets they hold if the legal owners of mortgages can’t be found? If banks can’t clear their books because courts continue to stop foreclosures because titling is unclear, if there is little information on whether those who claim they can cover risk defaults have the assets to do so?
Due to this diminishing knowledge, the economy is said to be in a not-so-usual financial crisis. As in the absence of numbers, the markets cannot be trusted. Therefore, in order to assess how bad things really are, depends on which part of the world is being referred to. The world feels particularly unpredictable because what is portrayed as a financial crisis in Frankfurt and New York is, at a deeper level, a crisis of transition. Confidence has drained out from the part of the world that is used to running the world, as there is uncertainty over what new principles should be embraced