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Could contagion spread through financial markets again?

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Longterminvestor

Administrator
News that the Italian government has suspended mortgage repayments is good for home owners and investors but what about financial liquidity in the money markets? Experts say it is only a matter of time before we see the financial collapse of Italy. This could be worse than 2008/9 when the banks start to withdraw funding from the money markets.
 
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diyhelp

Active Member
Italy was already a ticking timebomb with huge pension liabilities the country could not afford even before this crisis. When the Italian banks start to withdraw liquidity from the markets this will have a knock on effect and there is a serious risk of contagion. The world could handle the virus on its own but a financial crisis at the same time?
 
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PostBrexitInvestor

Member
I think this is the main reason why governments around the world are so keen to keep local economies ticking over, if the money markets wobble, the situation will become a million times worse overnight!
 
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diyhelp

Active Member
Once one part of the supply chain falls then it is difficult to get it back - how much money are governments prepared to throw at the issue? I see Richard Branson is demanding a £7.5b bailout for the airline industry. Who next?
 
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Ryan Lin4511

New Member
There are chances that it may increase in upcoming weeks!
 
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diyhelp

Active Member
The Bank of England has reduced UK base rates to 0.1% but this alone will not change much. It is the ever growing support of the government which will inject confidence back into the markets eventually. Once confidence begins to grow that will be the first sign of a recovery.
 
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realdeals

Active Member
Base rate reductions on there own will make no difference to this crisis. Global financial backing for business and people is what is needed. Business must remain viable until the crisis is over otherwise the whole system will come crashing down!
 
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lookinginvest

Member
So far we have not seen any signs of contagion spreading across financial markets with stock markets starting to steady. Perhaps the next big shock will be the USA where they are forecasting in excess of 100,000 deaths as a consequence of the coronavirus!
 
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Ryan Lin4511

New Member
Hi,
If the death rate is not controlled, there are chances for financial markets to slide down again!
 
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realdeals

Active Member
One of the elephants in the room is bridging loans - unless this is addressed it could see a collapse of the financial system. For example, those using bridging finance to renovate/convert a property would likely hope to refinance within 12 months on the higher value. If projects are being delayed, contractors walking off site and there is bridging finance needing refinanced who is going to committ to this? Also, if property prices do fall then this would restrict the amount of capital that could be raised anyway.
 
NewOrleansHomeBuyer

NewOrleansHomeBuyer

New Member
There is huge risk in the system. All these shutdowns have pulled so much money out of economies. I think the main problem is in corporate debt, as businesses revenues are in free fall they could default on their loans. This will ripple through the whole economy like dominoes if that play out.
 
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realdeals

Active Member
I agree but the banks cannot afford to let companies go under and the government cannot afford to let banks go out of business. We could actually see whole countries going under as a consequence of this, not just companies. How will Greece fair? That is a country which has been on its knees for years now!
 
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