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Systemic Financial Meltdown

Nineth: shade of the banking system shade of the financial system (as it is called by financial institutions not-bank clerks) goes in very soon facing serious problems. This shade of the financial system is composed for financial institutions that as the banks it cannot directly be rescued by the central bankings in the way as banks can make it. Tenth: the markets of action in U.S.A. and the exterior one go to start to more than precificar a serious contraction what soft equity TED spreads, BOR-OIS spreads, BOT-Tbill spreads, interbancria politics of valuation of spreads, swap spreads, VIX and other handspikes to prevent the risk of the investors solidly will be extended, of new. Exactly the reduction of the bankruptcy after the massive actions of the central bankings in last the December and January will revert as relative credit to the maintenance of high interbancrias taxes, the spite of later injections of liquidity through the central bankings. Tenth second: a vicious circle of losses, reduction of capital, contraction of credit, forced payment and fire sales of action below of the minimum prices will result in an increasing cycle and cascade of> losses and posterior contraction of credit. In a market without liquidity the current prices of market are still more low that the minimum value that they have now, given the problems of credit in the economy. The market prices include the discounting of the vast lack of liquidity, which had to the credit and the basic problems of the assets underlying that they are being strengthened with the financial difficulties.

The losses of capital go to take to the increase of margins calls e, later, to the reduction of the classification of the risk for a variety of financial institutions that now are being forced to mark its position in the market. One fire sale of action of this nature in markets without liquidity leads the future losses that go to contract the credit and to engatilhar more demands for margin calls and desintermediao of the credit.