Loory: We’re going to try to make some sense out of the so-called credit crunch or drop in stock markets around the world. Was it caused by the way American bankers made dangerous subprime loans to people who couldn’t afford to repay them as interest rates went up? Major banks throughout Europe and Asia apparently followed American bankers in lending money to poor credit risks. The international bankers did it by buying up bundles of American loans, and so the uncertainty has spread. The questions now are: Is this a short-term credit crunch, or is it the start of a major international market crisis? Is this the beginning of a sharp decline in the international economy that could cause job losses in countries that supply goods to the United States or in the U.S. itself? And what impact is this going to have on us whether we invest or not? Let’s start by asking how we should characterize what is going on in the European markets these days? Is this the beginning of a panic, and what is the long-term outlook?
World markets face uncertainty
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