Crisis wipes $1 trillion from financial stocks by Radka Konkolova

In the US the financial crisis has probably already started. There have been many problems with the economy last year, but now it is still more and more worse. It really looks like a slumps is going to happen sooner or later. And thanks to this situation the crisis and worse conditions are expanding also to the other parts of the world. And the consequence is decreasing interest rates, raising rate of inflation, everything is more expensive and real value of salaries is lower than its nominal value. And this means that people are skeptic about the investments and they rather save their money than invest, because it wouldn't be paying for them. And the value of money is losing. US economy has faced this problem for more than one year and now it is seen how much it has cost. Currently, companies are disclosing their yearly financial reports and every or almost every from them observed the loss of several millions or even billions dollars. So also the value of their shares have fallen down significantly. The overall loss poses something about $1 trillion. There are some reasons which shouldn't mean troubles for the economy when alone, but together they are very dangerous for economy, policy but mainly for people. It is because of decreasing value of dollar, housing crisis, increasing price of oil which causes higher price of actually of all products which have to be made and then delivered somewhere and high prices of foodstuffs as well. But this is also very unpleasant for financial sector, for banks and brokerages and shareholders and not least for companies, because worse economic results mean less money for investing and improving firm environment, as well as lower salaries and benefits for employees. I think for some companies is possible to go bankrupt if the economy won't recover soon. But this would be an opportunity for speculators who will afterwards buy such underestimated companies and connect them to their base firm in order to extend the production or something like that. They can help the economy in recovering process as well as the companies which will improve production and technologies and thanks to bigger space (from bankrupt firms) they can offer new jobs and positions. But as yet it is not as such serious level, so the most of more strength companies can only think about it. Nothing more. The results of the biggest and most known companies of US are completely different but the common thing is declining revenues. For example drop in names like Lehman Brothers, Morgan Stanley and Merrill Lynch caused the financial section of the Standard & Poor's 500 index to lose almost $150 billion in value on Monday. So this means that 85 financial components of this index have lost more than $1.3 trillion USD and shares of other 35 have lost more than a half of their value since last year. As you can see it doesn't look very good for Americans and for the surrounding world. But on the other hand, maybe US government wants to drop dollar to its lowest possible level. Nobody knows. But this should mean higher earnings when trading with European countries with Euro for Americans and lower earnings for Europeans when trading in dollars...

related story: http://news.yahoo.com/s/ap/20080707/ap_on_bi_ge/financial_losses;_ylt=Atd4OOTZDUdx0XICy6Oz4eus0NUE

by Radka Konkolova for PocketNews (http://pocketnews.tv)

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edited by Katarina Gaskova