[OPE] The all-up global costs of the financial crisis: $10.5 trillion and counting

The financial crisis costs not one trillion U.S. dollars, but much more, -
as a calculation, drawing on research by the Commerzbank for WELT ONLINE,
shows. Thus, the world's burden to the end of 2009 will increase to 10,500
billion dollars (7,300 billion euro). The losses of banks and bankruptcies
of financial firms since the third quarter of 2007 account for 600 billion
U.S. dollars. Joerg Kraemer, chief economist at Commerzbank, bases these
estimates on figures on Bloomberg news reports. The loss of value of
residential properties in the U.S. and Britain are piling up, according to
central bank figures and they are estimated by the Commerzbank at 4,650
billion dollars at end of 2009. And finally, the collapse of the global
economy in the years 2008 and 2009 will cost, according to Commerzbank's
calculations, some 4,200 billion dollars.

The Bank estimates that the world economy would have grown without the
crisis as much as the average of recent years. In fact, economic growth in
2008 was low, and in 2009 world GDP is expected to shrink for the first
time in 60 years. All in all, the Commerzbank arrives at a loss of 10,473
billion dollars. Germany contributes 237 billion U.S. dollars to this total.
Some 104 billion U.S. dollars out of this consists of the depreciation of
German banks, and lower economic growth in 2008 and 2009 will reduce gross
domestic product (GDP) by 133 billion euros. "In particular, the loss of
income that can be measured in GDP is surprisingly large," said Kraemer.
"The loss of income will be with us for a long time, unfortunately."

Because the crisis arrived from the U.S., the costs in the future will
increase even further, since subdued global economic growth in the coming
years is not even included in the bill yet. Hence the banks are reluctant to
overrate signs of light at the end of the tunnel. The International Monetary
Fund is concerned that the losses could add up to more than four trillion
dollars to the end of 2010. If that scenario is accurate, the banks have,
so far, written off not even half of all their bad securities. Yet there is
cause for hope, says Kraemer. The banks have already acquired 1,300 billion
dollars of new capital assets and replaced its capital shortfall by up to 80
percent. The U.S. housing market also shows signs of stabilizing, and
average housing prices are no longer falling. And the economic conjuncture
has stopped its nosedive: "The fact that this has been achieved is a great
result and was not self-evident," says Kraemer. #

Translation from
http://www.welt.de/wirtschaft/article4418941/Finanzkrise-vernichtete-bislang-10-5-Billionen-Dollar.html

According to a quick calculation by the Dutch Volkskrant newspaper, the
losses amount to about $1,500 euro for man, woman and child in the world
population, though obviously these losses are far from being so equally
distributed.
http://www.volkskrant.nl/economie/article1282998.ece/Crisis_kost_economie_10_biljoen_dollar

It is in fact not possible to suffer such a large loss of income and assets
without thereby impoverishing a stratum of the population, namely, those who
are already in a weak market position. Hence the outfall of the crisis is a
durable increase in unemployment and socio-economic inequality, which
is a relatively rapid process, since many more workers are now on
temporary contracts, and which in turn exerts downward pressure on real
wages, and increases the average rate of surplus value. It also means that
the recession is not an ordinary recession, and will drag on for much
longer; the "growth sector" in the world economy will be, increasingly,
those value-chains at the end of which the final consumers are those who
already have plenty income and therefore can afford to buy output: older
people; the state; the wealthy; rich countries.

Jurriaan

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Received on Sat Aug 29 12:06:34 2009