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World Crisis scenarios for the 21st century – Worldwide economic depression.(update 4)

Posted by Adrian on August 10, 2007

French bank BNP Paribas has suspended several Investment fund that backed subprime debt obligations. It appears that the subprime, or mortgage meltdown in America has now effected investment funds in Europe. The credit crunch looks closer to becoming a widespread problem worldwide.

The three funds BNP Paribas has suspended are Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia. BNP Paribas said the valuation of the suspended funds would resume “as soon as liquidity returns to the market”.

This means the liquidity or value of the cash assets of the investment funds are shrinking rapidly. So the European Central Bank needs to pump money into the banking sector.

The European Central Bank (ECB) has pumped 95bn euros (£63bn) into the eurozone banking market to allay fears about a sub-prime credit crunch.”

Although a temporarily helpful measure especially with cash assets and liquidity decreasing. Inflationary conditions may occur because of the now extra cash being flooded into the banking sector.

‘ECB moves to help banking sector’ – BBC Business

Now the Bank of Japan, Reserve Bank Of Australia have done the same ,

“The Bank of Japan added 1 trillion yen ($8.5 billion) to the financial system and the Reserve Bank of Australia loaned A$4.95 billion ($4.2 billion), joining U.S. and European central banks in responding to a credit crunch.”

Both Japan and Australia have had spill over problems with the continued subprime mortgage disaster.

A Sydney, Australian hedge fund called Basis Yield,

“Basis Yield investors have been warned they could receive less than half their money, after its investments in risky collateralised debt obligations were affected by widespread re-pricing of sub-investment grade debts. Both funds have halted redemptions as they try to assess the value of their assets.”

Business Age

Japan Bank – Shinsei Bank Ltd now under stress

“Shinsei Bank Ltd. said earlier this week its losses on subprime loans reached $30 million. Nomura Holdings Inc. cited 31.2 billion yen in subprime loan losses in its first-quarter earnings report.”

‘Bank of Japan, RBA Boost Funds in System to Ease Credit Crunch’ – Bloomberg


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