Financial and Economic Losses close to $1 trillion

The International Monetary Fund gave said that the losses as a result of the sub-prime mortgage crisis are grossly miss reported due to a collective failure in predicted the scope of the crisis and its far reaching effects.

The IMF has indicated that the losses that are tied up in property load to both customers and companies may grow to around $945 billion.

The fall in house prices may lead to $565 billion in mortgage-market losses alone.

In its annual Global Financial Stability report released today, the IMF forecast reveals that they fear the worst is yet to come as not all the asset write down and credit losses have been posted.

With the deteriorating balance sheets of the major banks and lenders coupled with the stale economy lenders are hard pressed to raise the necessary capital.

The current issues are more representative of a liquidity problem rather than a deep seated problem of a credit crisis than stems form a lack of confidence in the market place.

A year ago the IMF had predicted that the effects of the sub prime mortgage crisis would be relatively small and actually placed the blame on lax regulations coupled with a distinct lack of understanding about the risk of financial products for the crisis being experienced.

Today’s prediction however is an altogether more bleak prediction and a truer reflection of the crisis.

The fund, which predicted a year ago that any ripple effects would be limited, blamed lax regulations and a lack of understanding about the risks in structured financial products for the crisis.

Following the prompt action over Bear Stearns, the fund highlighted that the financial stability is still uncertain despite the strength and resistance offered by the emerging economies.

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