Despite the repeated assurances by the US Federal Reserve, it seems that the global financial communities are not assured that the credit squeeze has been contained or that it is a localized problem.
Today, Bank of England and European Central Bank added to these concerns by offering to
inject more liquidity in the system - a move coinciding with the reports coming in of the whopping fall of 12.% in the US demand for homes (against a predicted drop of just 2%).
Should the US economy recede into a recession, the world economies are also bound to be hit hard; for example, concerns are already being raised about the adverse impact of subprime crisis and strengthening rupee on the Indian IT sector; also, a credit squeeze
will easily translate into less FDI in the infrastructure projects and thereby, further drive down the Indian economic growth.
As usual, The Economist has a nice article on
how much will the credit crunch hurt the world economy? Another, interesting, viewpoint by the venerable magazine analyses whether
any good can come out of a US recession.
Happy reading!