A Crisis of Confidence

Is a Liquidity Crisis

• Perception of higher inter-bank lending risk
• Banks are unwilling to lend to each other
• leading to a ripple effect across the financial markets

Ironically

• Inflation is not the main issue here
• Strong fundamentals leading to high economic growth

Requires Intervention

• From the Central banks to restore confidence in the markets

Essentially

• a financial market crisis
• however if there is no intervention from the central banks this will spill off to the economy leading to a systemic risk.

Affecting

• Investment Banks
• No assets

Not Directly Affecting

• Commercial Banks
• Has a huge deposits base

Not Affected

• Manufacturing / Brick and Mortar
• Fixed asset base

Historical Perspective

• Sub-prime loans
• Affect Alt A loans in the short term
• Affect Higher Loans in the mid term

- a synopsis of a NDTV program telecast on 19th September - "Financial Tsunami - The Ripple Effect'