The impact of the financial crisis could be a lot worse than official numbers suggest. And the losses are permanent, suggesting a massive shift in the economy and stock valuation. Certainly, the size of the bank losses in the financial meltdown is nothing short of staggering.
Reuters reports there have been more than $1.1 trillion of toxic assets and bad loans since the start of 2007. They were led by Citigroup which lost a mind-boggling $123.2 billion, nearly double the second on the list Wachovia Corp. And according to the International Monetary Fund, US banks are forecast to lose about $1 trillion and Europe's banks will have lost nearly $1.6 trillion in the 2007-10 period.
Even more alarming is this warning from the Bank of England's executive director for financial stability, Andrew Haldane. He says the loss of production resulting from the global banking crisis may be between $60 trillion and $200 trillion.
Even worse, he says that money cannot be recovered. "Evidence taken from previous crises suggest that production losses induced crises are permanent, or at least persistent, as regards the impact on the level of production, not counting its growth rate," he said.
If he is right, it means that impact of the global financial crisis is a lot worse than we have been told.
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