Looks like corporate and individual GREED has finally caught up to us here in the United States!

For too long, the needs of the wealthy and corporate elite were catered to at expense of middle-class and poor-class citizens.

GREED doesn't pay, and now it will be a hard fall for many of the greedy who took so much unfair advantage of people. They deserve to suffer now.

J. S. C., Monmouth, Maine, USA

Sub prime mortgage-backed securities account for a market worth $6trillion (total US Treasury market is only $26trillion). If you think a drop in the market of something as huge as this will NOT trigger a recession think again. There will be 4 quarters of sub 1% growth in the US in 2008 I am quite certain of that.

JG, London,

Update the headline and article! US shares have rebounded (though still negative). But only down 1%, not 3.5%.

Jim, Los Angeles, USA

Rachel in London said
"it isn't a 0.75% cut - it's a 0.75 percentage point cut.
elementary"

Please, can anyone explain what on earth she was talking about - surely 0.75% cut means the same as 0.75 percent (of a point) cut - at least I always understood % to mean percent - and that's what plenty of economics editors are writing at this momement.

Is this someone trying to sound clever when they ain't?

Father Ignatius Brown, London, UK

I know exactly what the Americans will do if this is serious. They will find a way to go to war and the cogs are in already in motion for this.

Simon McDonnell, Welwyn, Herts, UK

Maybe I'm abit naive, but somehow I think that the economic crunch has alot to do with the price of oil. Talk about killing the goose that lays the golden egg. The Arab oil barons had better wise up and pump more oil and drop its' prices or their desert kingdoms might soon return to the camel and donkey era as we also will go back to the horse and buggy times. Talk about an unhealthy transfer of hard earned wealth in a relatively short time to a people who never earned it!

Yank, Warrenton , Missouri

Phew! Thank goodness I didn't try and post a sensible comment like Huw....

and thanks so much rachel what enlightenment! What's the difference anyway?

Oh... and BTW your address isn't london, london - it's London, England.
elementary

Jacq, London, England

like it or not the bank of england will have to reduce our interest rates

infact they should not have increased them over the last twelve months

theo, truro,

Would it be clearer if I said 75 basis points?

Huw Sayer, Norwich, England

I think that we need to take a step back and look at what's happening.
The USA has a problem in subprime RE lending which is about 50% ofn the way thru the pipeline already. By itself it's unlikely this would cause a recession in the USA. Just a couple of Quarters of 1% GDP gowth B4 back on track with 2-3%.
But we have also seem a worldwide bubble forming in Real Estate (much more problematic than anything in the USA), commodity prices spiralling, as Asia has been experiencing massive growth lead by China. China is an economy both w/o leadership and w terrible environmentally and health issues. Mid year the Olympics will see China close factories for a few months in an attempt to clean up the quality of air. This alone will slow their growth, but it's likely it will highlight how major their domestic problems are and begin a terribly expensive move towards easing pollution.
As the US expands in growth late 2008 look for commodity/energy and RE falls overseas + a stronger USDlr

Ian, Madison, USA

I agree with Huw that we are seeing a similar retrenchment to the 2000-2003 fall, and we are only 6 months into this one!

However I am not so optomistic that it will be over so quick, and only fall by ~48%, as the last fall was due to overbuying in IT stocks, and only a 1 month US recession (officialy.)

This fall is due to bad debts that have been well hidden by the financial institutions, and bad personal debts, perticularly in the UK, that will make this fall very punishing for those over extended. Also combined with this Debt fallout, will be the house price bubble bursting at last!

Nasty!

Christian, , London, , England

it isn't a 0.75% cut - it's a 0.75 percentage point cut.
elementary

rachel, london, london

From its peak in late 1999 at around 6930 - the FTSE 100 fell in 2000, 2001 and 2002 ending up somewhere around the 3560 mark - a sustained three year fall of 48%. Now that's a real bear market.

If this turns out to be as bad (and judging by the Fed's panicky 0.75% cut it's not going to be pleasant) and you take last summer's peak at around 6700 as the start of the slide (note we never made it back to 1999's high) then we are about half way down.

Sure there will be rallies but a real bear will chew them up and spit them out - so the bottom might not arrive until 2010.

Meanwhile, watch out as the credit crunch returns when the Monolines come off the rails and the issuers of Credit Default Swap start crumbling as the recession bites and defaults rise.

Then we will see banks raising interest rates no matter what the Fed does to base rates, simply to encourage more depositors to rebuild their balance sheets.

Lenders here have already started raising rates.

Huw Sayer, Norwich, England