Financial Crisis Largest Ever in Dollar Terms; 5% of U.S. GDP

With the International Monetary Fund raising its estimate of aggregate writedowns based on global holdings of U.S.-originated and securitized mortgage, consumer and corporate debt to $1.4-trillion from $945-billion in April, the current financial crisis will prove to be the largest ever in U.S. dollar terms, according to National Bank Financial.

As a share of GDP, however, it pales in comparison to the Japanese banking crisis, which wiped out 15% of its economy, and the Southeast Asian crisis, which saw 35% of the region’s GDP lost, chief economist and strategist Clément Gignac told clients.

He noted that the IMF estimates that 55% of the potential losses have already been recognized by financial institutions, half of that outside of the U.S.

“Assuming that the share stays the same for the remaining estimated losses would bring the total price tag for the U.S. at 5% of its GDP,” Mr. Gignac said.

Comments

[Jimmy Lathrop:]

This article provides a bellwether test as to whether your individual outlook is optimistic or pessimistic.

The optimist would say "Well, things aren't that bad!"

The pessimist would say "It can get a lot worse."

2008 Oct 09 06:03 PM