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Ford Motor said the combination of fallen asset values on its auto inventory and credit charges resulted in an $8.7 billion second-quarter loss including write-offs related to $5.3 billion in asset value decline and $2.1 billion in write-downs for Ford Credit's truck-heavy lease portfolio.
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Hence the risk of falling asset values stays with the borrower.
In the bust many borrowers have had to find more collateral to offset falling asset prices.
In the financial markets, falling asset prices were leading to margin calls and more forced selling.
Credit dries up, and the economy can enter a vicious cycle of falling asset prices and job losses.
Some fear that accounting dogma has caused a cycle of falling asset prices and forced sales that endangers financial stability.
Even if some gain from falling asset prices, lenders and insurers have to book losses, which leaves them needing money.
The negative impact of falling asset markets will have a further reinforcing effect on [falling] consumer confidence.
The combination of increased debt, falling asset prices and stagnant incomes does not threaten just imprudent borrowers.
He claimed not to know when asset prices were in a bubble but he did always claim to know when falling asset prices were likely to cause havoc.
Bank shares were particularly hard hit amid concerns that falling asset prices would lead to more write-downs; those of Citigroup fell by 23% in a day.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com