The last two weeks have certainly changed the world of finance forever, assess analysts from Privredna banka Zagreb in the latest PBZ Weekly Analyses, estimating that events centered on Wall Street will affect almost all items of the Croatian balance of payments, it is just a question of how strongly.
Reminding of the main events in global financial markets, especially the American one, they believe that each of them represents a significant change in the world of finance, and together they are simply of historical significance. Many speak of the end of one era (and the beginning of a new one), and it cannot be said that the crisis has stopped with these events. Among the main events, they cite: on September 7, the U.S. government “took over” two giants of the real estate market, promising to invest one hundred billion dollars in each. Seven days later, the 158-year-old investment bank Lehman Brothers declared bankruptcy, on September 15, Bank of America acquired the investment house Merrill Lynch, and on July 17, the U.S. government rescued the insurance giant AIG from certain bankruptcy by securing 85 billion dollars in liquidity assistance along with de facto nationalization.
During those days, central banks around the world attempted to save money markets from collapse by injecting hundreds of billions of dollars, taking questionable quality papers as collateral. On Friday, September 19, U.S. authorities announced a “comprehensive approach to the crisis” along with the establishment of a special fund that would take over bad bank real estate loans amounting to up to seven hundred billion dollars. The only two remaining major investment houses, Morgan Stanley and Goldman Sachs, received approval from the Fed yesterday to transform into commercial banks. Finally, the U.S. government secured investments in money market funds (mutual funds) approximately equivalent to the deposit insurance in banks for individuals and institutional investors.
Each of these events is a significant change in the world of finance, and together they are simply of historical significance, emphasize PBZ analysts. We cannot say that the crisis has stopped with these events, they note, adding that it remains to be seen how the latest measures taken by the U.S. government over the weekend will affect stock exchanges and markets around the world, especially in the medium term. Noting that it is still early to analyze the consequences of the crisis on the real sector, on the world, they observe that a particularly important question is what the possible consequences of these events will be on the Croatian economy. Although it is early to speak of final consequences as the crisis is still ongoing, and the tsunami of this latest earthquake centered on Wall Street has not yet hit Europe, they assess that there is no doubt that the events will affect almost all items of our balance of payments (which is a total overview of Croatia’s transactions with abroad) it is just a question of how strongly.
