[Tomas S]

CRISIS??????????????????????dd? basically i was just wondering , how does the events in the u.s effect the rest of the world?mainly focused on people,stocks,currencies, and bonds and commodities markets??

[Arlie]

Effect on People:The credit crunch in subprime market has slashed home prices by $ 2.5 trillion from household wealth, or about $25,000 per homeowner. It is because the houses supply become bigger than the houses demand before the subprime happen.Effects on Stocks:The credit crunch affect banks' liquidity because they get most of their revenue from the interest rate yielded by the credit market. Moreover, they have not just lost their income from the interest rate but they also lost most of its total credit value. In effect, banks don't have enough money to lend fund for companies which listed in Dow & Nasdaq. Ironically, most companies depends their funding from bank lending. So, the Dow and Nasdaq index became to fall because the investors didn't believe that the companies listed would perform.Effects on Currencies:The bad stock market condition make foreign investors believed the Dow and Nasdaq index were no longer profitable, so they drew their money (foreign currency) from US. In effect, the foreign currency supply become lower and the US $ getting weaker to foreign currencies. Effects on Bonds:The interest rate yielded by bonds is getting lower because The Fed reduce their interest rate in order to dampen the inflation rate caused by increasing commodities price and to boost consumer spending.Effects on Commodities Market:The huge loss suffered by investors from housing & stock market, make they shifted their money to commodities market. So, the commodities demand were getting higher and their price were rise dramatically.I hope my explanation could help you understand our current economy issues..