Is Credit Crunch 2.0 Imminent? by Satyajit Das

From Green to Red – Is Credit Crunch 2.0 Imminent?

By Satyajit Das - August 28th, 2011, 8:00AM



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Satyajit Das is author of Traders, Guns and Money: Knowns and unknowns in the dazzling world of derivatives (August 2006) and Extreme Money: The Masters of the Universe and the Cult of Risk (August 2011)



Fact 1 – The European debt crisis has taken a turn for the worse.

There is a serious risk that even the half-baked bailout plan announced on 21 July 2011 cannot be implemented.



Fact 2 – Problems with banks have re-emerged.

Banks globally, especially European banks, are seen as increasingly vulnerable to European debt problems. The total exposure of the global banking system to Greece, Ireland, Portugal, Spain and Italy is over $2 trillion. French and Germany banks have very large exposures.



Fact 3 – Money markets are seizing up

Banks and financial institutions are finding it increasingly difficult to raise funds. Costs have risen sharply.



Fact 4 – The broader economic environment is deteriorating.

The global economic recovery is stalling. The risk of a recession or minimal growth is significant.