The so called credit crunch is a symptom of the structural flaw inherent in in the type of Capitalism the Washington Consensus embodies... It has created a situation where economic growth is dependent upon the growing gap in income and wealth distribution...
the main players in fueling the domestic market have no capacity to increase or even maintain spending levels... zero savings.. credit worthiness zilch... productivity gains through wage stagnation for semi and low skilled workers reached limit- negative impact on Domestic Demand...

yes I'd say the Fed's Corporate Socialist welfare package will merely recreate the very paradoxical conditions for another downward turn as growth in wealth flees to the wealthy without a substantive impact on boosting domestic economy.

the stupidity was to imagine that an increasing divide in incomes and wealth distribution would continue to fuel the domestic economy...

otro, lima,

Its a Matter of Trust and Confidence! and when that has been undermined by greed and incompetence, then you have runs on Banks and other financial institutions.The crowds waiting to withdraw there money from northen rock is a classic example, a sight that frightens any western goverment and is a ghostly reminder of the great wall street crash of the 1920's, and so they pump money at the problem in an effort to simply buy time in a hope that things will correct themselves. But will they correct themselves, when the broblems are so systemic, when the ambiguities and deceit of the financial markets and there products are so deep rooted !

The Finnacial System is becomming very fragile will it continue as a going concern or will it fall over, who nows but the ones who stand to lose the most are the ones it is continually being propt up for by western governments the Rich
Since i humbly do not fall into that catagory i will sleep soundly at night.

Phillip Jones, Swansea, Wales

Sobering up on whiskey, yeah, that will solve the problems.

Bob, Katy, TX

The feds should stop bailing out billionaires, 208 billion. I can hardly wait to get my 300 rebate so I can buy some over priced groceries.

Bill, adesperately Poor Farmington, Maine

This is the tip of the iceberg. The US, as always, has taken things to the extreme and will pay the consequences. However, Europe, Australia, and even parts of Asia are all in for big adjustments. USD 500,000 one bedroom shacks in Ho Chi Minh City? No bubble there... right....

Tom, Chicago, IL USA

The Fed under Bernanke will continue ad hoc bailouts of banks and investment banks in order to prevent the possible cascading collapse of the banking system. His interest in the history of monetary policy makes him keenly aware that tight monetary policy caused the banking system collapse in the 1930s,which in turn was a leading cause of the Great Depression. He won't wish to risk a repeat that experience.

It would be interesting to calculate the effects of potential bailouts,say $800 billion worth,on both US inflation and the value of the dollar.

An optimistic scenario is that the Fed's injection of liquidity is not inflationary because it merely helps to offset a drying up of liquidity. Later this year, the Fed could tighten monetary policy.

It makes sense for the Fed to accept AAA mortgages as collateral unless the end of the world is nigh. Who wants to sit on a pile of gold in a fortified bunker?

patrick slattery, Dublin, Ireland

How I love it when rich folks lose money. Putting money on the stock market is no different from walking into a betting shop and having a punt. If you lose your shirt, you deserve it.

Paul Downes, Milton Keynes, Bucks

glad I'm paid in Yen!

John, Tokyo

John, Tokyo, Japan

I quote Nigel Maund:

"...their collective lack of Governmental controls on the banking system the US, UK and Australian Governments have seriously undermined confidence in the existant democratic form of Governments we now have. These exist merely for the benefit of the respective resident elites."

Does anyone else familiar with central banks find this to be ignorant?

Brandon Lynch, Charlotte, NC

This is great. Rich people make a lot of dodgy decisions i.e. gamble on property, stock market, oil futures and come up short. And the US government bails them out with tax payers money. I wish I was one of the rich.....

J. Taylor, London,

The government did not bail me out when I needed a bialout. The government did not come to my aid when my cash position had 'significantly deteriorated'.

This government aid for the rich is complete bullsh**. They made the bad decisions. Let them live with the consequences just like all the rest of us do. If their decisions had led them to great riches instead, they would not be looking to distribute those gains to the public or anyone else. But they get to distribute their losses to the taxpayers who in the end wind up funding the whole mess. This is not going to have a happy ending. Ripping off the public and future generations is going to end one way or another.

Bailing out banks and people who made bad decisions only gurantees they will not learn from those mistakes and you will only make things worse. Oh wait I forgot.. we are already there.. things are already 'worse'. Greed and corruption are live and well in Washington and Wall Street.... and everywhere else.

John Q. Public, Los Angeles, CA USA

An empty bank account and poor job prospects for fifty million citizens will have a greater political impact than WMD proliferation halfway around the world. Terrorism hurts a few thousand people at a time. Economic malaise hurts tens of millions (and urban unrest is not funny).

The year 2008 may be a year of decision, not because it is a presidential election year, but because the West may be shaken to its foundations.

John, Southern CA, USA

"By this latest but surely not the last bailout, the Fed is simply transfering the banks' problem to the public (a.k.a., the little people).

It is the public that will pay the price in the end. An very old story, the law of concentrated benifits and disbursted costs.

They should let the banks go under. So much for the free market.

yehuda cohn, nyc, ny"

How ignorant do you have to be to call an economy with a centralized bank system, with currency unbacked by any hard value, printed at will by the government, a free market?

Felipe, Syracuse, NY/USA

Alex Jones is RIGHT

Randall, Austin, USA / TX

If anyone's interested, google "The Money Masters" and download this movie for free (4+ hrs. & worth every minute). This is a comprehensive documentary on the history of money and banking practices and provides a thorough examination of the development of the Federal Reserve; the role central banks play in America and around the world. This is not the kind of history you'll get in public schools, I assure you.

Regina Griffith, Lynchburg, Tennessee

Being a homebuilder ... when am I going to be bailed out ???

Nick, Destin, Florida

Looks like a great opportunity to go on a buying spree! Some stock in the financial sector that had excessive P&E ratios are now very attractive investments.
Hey, if you beleive in gloom and doom go out and buy yourself a bunch of gold coins with Euro's in a stockpile.

Bob Snakely, Monroe, USA/WA

By this latest but surely not the last bailout, the Fed is simply transfering the banks' problem to the public (a.k.a., the little people).

It is the public that will pay the price in the end. An very old story, the law of concentrated benifits and disbursted costs.

They should let the banks go under. So much for the free market.

yehuda cohn, nyc, ny

No one has factored this in- the economy and the markets are always tied to the proce of oil globally. As the price of petro rises, there is an inverse slow down across the board- the problem is it is 18 months later. What you see now was the rise in oil 18 months ago. The price of oil hit $111 yesterday, which means that 18 months from now there will still be problems.

Why 18 months? It takes that long for stockpiles to work their way to the farmer/trucker/airlines.

This is a concerted effort by the FED to bring the market down without crushing it and causing a depression. It is well calculated. The signs are there if you know where to look.

Charles, Sanford, NC/USA

We all agree - the plebians finance the publicans.

The Robber barons of the last century at least did some great philanthropic things for us 'scrabble.'

I'm sorry to say that the current ones in charge only want to save their skins. My brother in law realestate financier sees business as 'booming' while us proles watch rome collapse. All we have left to console us?

"it is easier for a rope (not a camel) to thread the eye of a needle than for a rich man to gain passage into heaven."

drphil, newton, ma

This is all part of a larger problem that must be addressed by a responsible Government in Washington D.C. and there is none. Although McCain is the best of 3 running for President, it is quite likely that a tax and spend president and Congress is in the works which is like a free credit bank lending money hap hazzardly. Instead of cutting losses, they spread it to the rest of the economy by doing wreckless things like printing more money.

I am affraid that bold and organized action is necessary on the part of a czar, much like Putin in Russia. It is really too bad, that the lackies in our congress, banks and federal reserve have come to this. If Putin were running for president of the US I might be inclined to vote for him, because no one in the US shows any discipline whatsoever and it threatens our very capitalist and democratic system.

Randy, Houston, TX

The Clayton Antitrust Act is being violated by this open buying of private contractual obligations by the Federal Banking System. Any fraudulent conveyance or conveyance of fraudulent "contract obligations" equals felonies. We need Spitzer more than ever. He is so enthusiastic in whatever he does.

Richard Stump, Muncie, Indiana, USA

In regards, to iain in bedford, uk. Your theory would seem correct that what took several years to build would take several years to reverse, unfortunately, our banking system does not work like that. What can take several years to fester is usually wiped out overnight. Instead, of toying with the crisis, the Federal Reserve should right now prepare to put 500 billion dollars into play while instantly wiping out 3 of the biggest culprits. Right now they can not print more money without steep inflation. The entire spectrum of debt holders worldwide are going to have to take their share of losses in this, not just me because I am paid in American dollars. It is unscrupulous on the part of the very rich to expect the American Federal Reserve to print more money thereby making my paycheck more worthless. I am simple middle class. You fools saw that America did not need 3 expensive homes per family but talked Americans into buying them anyway. Now take your share of losses.

Randy, Houston, TX

Wow, everyone hoping the USA will somehow sail out of this...I wish I had a million to gamble right now, I'd put it all on red, as in shorts right and left. Its like the opposite of a bull market right now, shooting fish in a barrel. The DOW was at 4000 in 1995, so we have a long ways to fall folks. People have already taken huge dirtnaps in the financials and homebuilders. Lots of people must be totally ruined, but is anyone interviewing them? Of course not. yeah, we better save the big banks, because noone's got any credit, and housing is falling so fast. The air whistling by just keeps getting louder and louder. Think of it this way folks,
its not gonna take too long at this rate. As said in Robocop, It's easier if you think of it as a game, Don...There are winners and losers...I'm cashing your chips out....
Maybe somehow the US and the world that's not decoupled plus the commodities insanity bubble of imagined safety will make it through this patch, but I dont see how.

Jackson Wallace, Seattle, USA

The market will work it out. If some banks fold, so be it. The last thing we need is some knee jerk legislation that does more harm than good. People have short memories. It was much worse in the U.S. in the 80's.

Biff, Dallas,

take all your $ out of the bank..and let the greedy squirm..time for them to feel our pain. Oh I kinow many of you don't understand my view..But than again thats why we are here..You Just dont get it and continue to play the game.

jim, Ithaca, NY

The borrowers and lenders made bad decisions. What's worse though is that suspect collteral is being foisted on the US taxpayers and the printing presses are spitting out money like Doubloons at Mardi Gras.

FRD, Belle Mead, NJ USA

Protect your life savings - Buy Gold & Silver now!

Jerry, Csprings, CO/USA

These bankers made millions for their pockets and now the FED prints more money to bail them out.

CEO's should be forced to give back ill gotten gains -

OVERPAID BANKERS ARE EACH OTHERS FRIEND AND OUR FOE

joe, NY,

By their collective lack of Governmental controls on the banking system the US, UK and Australian Governments have seriously undermined confidence in the existant democratic form of Governments we now have. These exist merely for the benefit of the respective resident elites and not the electorate as a whole. The proping up of Bear Sterns and Northern Rock has been done with ordinary taxpayers money. This is patently in the wrong. Barings was allowed to collapse as so should have been Northern Rock and Bear Sterns and if it comes to it as it no doubt will Citigroup.

Nigel Maund, Perth, Western Australia

Those who shorted the market were unfairly stung when the so-called "natural" balance was brought undone by this measure.
Investors, consumers and taxpayers have all been conned into funding the shortfalls of avaricious and fraudulent bankers, again. The only trouble is, in the only slightly longer term, the penalties caused by so many artificial imbalances will exacerbate the damage when the chop ultimately comes down on our collective necks. When there isn't an honest report coming from any ratings agency, financial institution or regulatory body, or the mainstream media for that matter, then what chance has anyone got?

William Jorgensen, Noraville, Australia N.S.W.

glad I've parked the majority of my capital into precious metals and glad I didn't listen to the so-called experts telling me several years ago that gold was no longer applicable in todays economy...LOL yeah right

Allan, Sydney,

Follow this path for a second.

Oil companies sell oil in U.S. dollars. The banks since Bush took office have devalued the dollar by more then half (compared to most currencies). When the value of the dollar goes down the value of commodities stays the same globaly but goes up against the dollar, which means they put a bigger number in front of the comodity they are selling in that currency. Americans now have to pay more devalued currency to buy their gas. This extra money goes to the oil companies record profits. But the currency is still only worth half of what it used to be before they dropped it's worth. They buy up (invest) American companies, and when Bush leaves office, they wait for themselves to bring back the dollars value. The American invested companies global value increases as the currency increases. It's a pretty easy game to figure out, watching the Fed do rate cuts and print boat loads of cash when they're suppose to be doing exactly opposite to stop huge inflation.

John, Essex, CT. USA

Smaller sums of money enable the market to take a breather, allowing market forces to create an "orderly" dispersal of capital (to money heaven). Low rates allow the banks to refinance at a lower rate and stretch out the pain in a longer healing process. The key concern is reducing the panic levels among the general populace because a dramatic reduction of consumer spending would be adding fuel to the fire.

You all can bleat all you want about the Fed but as the banker of last resort for the American empire and world, all central banks will fall in line and share the pain. It will take time to sort all this out but with China willing to accept American paper forever, there is little doubt that this will end positively.

Overall, I love these end of the financial world stories (anybody remember Penn Central from the 1970s). The American financial empire is far from done - get ready to buy when there's blood in the streets!

Steve, Vancouver, Canada

Many bet against the United States. Europe has been bailed out by US over and over again, but still they doubt. I am only 2nd generation American from Italy, and I'm very happy to be here and not in the EU. Americans are pretty resilient, and we've had this flu before and know what to do. All you have to do is get our attention, and we can do anything!

Tony Burzio, San Diego, USA/CA

At the end of a meal, you must pay the bill.............

"If you don't hold it, you don't own it"... Ponce

Ponce, Oregon, USA

If I'm not mistaken, Bear Stearns is a brokerage, not a bank. The distinction in the US is that a bank would have to take part in the FDIC (Federal Deposit Insurance Corporation) plan to guarantee deposits and would be eligible to borrow at a discount from the Federal Reserve system as their reward for doing so; I'm not sure a brokerage would have the same access to borrowing from the Federal Reserve Bank...

Rich, Connecticut, USA

Several hedge funds with assets of more than $4 billion (£2 billion) were on the brink of collapse last night or had halted withdrawals, despite moves by the US Federal Reserve this week to ease America’s deteriorating credit crisis with a $200 billion collateral lending facility.

The potential closure of six funds came as a leading private equity executive, who declined to be named, said that such funds were “snapping like twigs”, with one failing every day.

Yesterday Patti Cook, Freddie Mac’s chief business officer, predicted that the Federal Reserve’s $200 billion bond lending facility this week would fail to solve the long-term problem of Wall Street’s deepening credit crisis.

The funds’ predicament – seven funds have been frozen this month – was seen as evidence that the initiative by America’s central bank to allow lenders to swap their risky mortgage-backed bonds for safer Treasury debt, will be of help only in the short term. Those fears hit the dollar and New York

DAVID BELANGER, shirley/ma, usa

The United States is financially aflame and there is no pressure in the water line. Worse still, we are morally and ethically bankrupt. I say this from a purely secular point of view.

hojo0710, Knoxville, TN

..because they always rally! The extra liquidity offered by central banks is being seen by traders as steadying the global economy but they've been throwing billions into the markets since last year and it's obviously still not having much effect.

KV, London,

Why did the markets rally?Any ideas?

stephen hulton, eure, france

Isn't it usually the case that when things go wrong, it's because of a long-term pattern of neglect which can only be remedied in a similar period of time? If a marriage shows signs of trouble after years of abuse, it can't be put right in a day or a week. Businesses which fail after years of neglect can't be turned around in a month.

Markets acting irrationally for years, if not decades, represent trillions of dollars of entrenched erratic behaviour. So how can sums of money several orders of magnitude smaller than the problem, be expected to immediately put it right?

iain carstairs, bedford, uk