Tuesday 28 October 2008

US$2.8 trillion - the losses so far

"Total mark-to-market losses across the three currency areas (Dollar, Sterling, and Euro) have risen to around US$2.8 trillion. This is equivalent to around 85% of banks’ pre-crisis Tier 1 capital globally of US$3.4 trillion, though only some of these market value losses are directly borne by banks."

Bank of England Financial Stability report 2008


It is a fearful number - US$2.8 trillion. It is approximately the annual GDP of the UK. However, the fact that this number also represents 86 percent of the bank's tier one capital is even more astonishing.

Of course, the banks will not be alone when it comes to absorbing these losses. Other institutions, such pension funds and private investors - are also holding distressed mortgage backed securities.

However, it was the banks who cooked up these losses through ill-conceived financial engineering.

3 comments:

Nick von Mises said...

"However, it was the banks who cooked up these losses through ill-conceived financial engineering."

You can't sell snake oil unless there's a sucker dumb enough and greedy enough to buy it.

Anonymous said...

nick, we are a nation of debt suckers.

Anonymous said...

That losses numbers seems to go with every passing month.