Risks to Financial System Remain

http://www.bloomberg.com/apps/news?pid=20601083&sid=ahE9AhLa3EvE&refer=currency

In the beginning, there was a lack of confidence. This leads to a credit squeeze. Central Banks around the world added liquidity and in the US, where it all begins, the Federal Reserve Bank lowered interest rate. This helps to stabilize the financial markets around the world.

What follows is no longer a lack of confidence. It is a result of a reduction in spending due to higher inflation, higher price, loss of jobs and less earning around the world. You will realise many companies are reporting lower income due to margin squeeze. There are more company giving profit warning as well recently. Even in China, where growth is still in the single high digit, you will have notice more companies giving profit warning. During the recent quarterly reporting, many companies reported lower gross margin.