Credit Freeze

The current credit freeze taking place in the US is wreaking havoc across the world.

Again, the US being an US$11 trillion economy means that financial troubles within its borders can have serious ramifications on the other side of the globe. The world is so much linked with each other that no country can stay immune from the bloodbath coming out of Wall Street.

Philippines banks' exposure to mortgage-backed US securities is reportedly around US$300 million only, but curiously the GSIS hasn't made a disclosure as to the extent of its sub-prime exposure. I shudder at the thought, considering that pension benefits of government employees are at stake here. If it is significant, then we really have a big problem.

Another pressing issue would be the expected global economic slowdown. Slower US consumption spending is a major concern because the US is everybody's biggest market. When that market dries up, then expect business failures and rising unemployment figures.

Coming from a high-oil price environment, the last thing that is needed right now is the unavailability of capital. If businesses are unable to borrow to fund working capital needs for example, then how are they suppose to carry out their daily operations?

One main difference, however between this crisis and the last Asian financial crisis is the fact that Asian banks' balance sheets are pretty much stronger, having learned from that debacle, except for a few, of course.

Lemme digress a bit. I wonder how much losses Temasek, the Gulf States and China's sovereign funds are booking on account of the financial meltdown in the US. Marc, watdayyatink?