Credit Crunch

As the prospect of life in recession-struck Britain becomes far less lucrative, the number of Eastern European migrants moving to the UK has dropped by over 40%.

2008 started quite innocuously, with little sign of the true scale of the turbulence to come. But twelve months later, the devastation continues, as retailers fall like dominoes, unemployment continues to rise sharply and everything from the pound to house prices carries on plummeting. In short, 2009 will probably be another year of taking it on the chin. So, chin up.

Lehman Brothers burdened $60 billion in soured real-estate holdings, filed a Chapter 11
bankruptcy petition in U.S. Bankruptcy Court after attempts to rescue the 158-year-old firm
failed. Bank of America is bailing out Merril Lynch in a $50 billion all-stock transaction.
In addition, Fannie Mae and Freddie Mac have fell hard and so are many other respectable banks.

One year into the Aug 2007 subprime crisis, and the financial sector is still reeling from the after-effects. Billions of dollars were injected into the money markets and interest rates slashed but the deleveraging journey remains arduous.

The Federal Reserve said Wednesday it is extending its emergency borrowing program to Wall Street firms and is taking other steps to ease a severe credit crunch that has hobbled the national economy.

We all know the catch-22 situation facing the Federal Reserve… stagflation . A stagnant economy coupled with rocketing inflation. At the rate oil is increasing, we can expect our daily products to double in prices within the next 2-3 years.

Finance ministers at the G8 summit in Osaka, Japan, have warned that stagflation — recession coupled with high inflation – is now a more serious challenge to global growth than the credit crisis.

William Patalon III in Money Morning sees a universal theme emerging: Inflation, Inflation, Inflation…

As the financial services giants get cut down to size, metals are now the biggest source of mergers and acquisitions on Wall Street, according to a report on Bloomberg.

Countrywide shot up over 10% in early morning trading as the cost of protecting their debt against default fell for a second day in a row on growing confidence that Bank of America will proceed with its acquisition. The market was also glad to hear that David Sambol will retire as president of Countrywide after its acquisition by Bank of America.

The end to the credit crunch is still not in sight, European Central Bank President, Jean-Claude Trichet and Warren Buffett warned on Monday.

"These are demanding times, challenging times... It is an ongoing, very significant market correction," Trichet told BBC radio in Britain.

It looks like earnings are really driving this market over the last few weeks as investors are looking for signs of stability. Last week Google helped drive the markets higher. The week before GE helped to drive the market into the ground. Looks like it is Bank of America's turn.

Rice prices have hit new records for a fourth consecutive day after the world’s biggest importer of the grain, the Philippines, said it would be forced to buy 1 million tons of the grain to feed its population. “Forget the credit crunch for a moment.

It is fascinating to see how Leucadia is boosting its stake in Americredit. One just has to conclude that Leucadia believes that some of the stocks impacted by the credit sector issues are now beaten down enough to start preying on them

MBIA Inc. reported write-downs of $3.5 billion on souring credit markets Thursday, exacerbating concerns that rising costs could squeeze local governments as well as slow any recovery for big banks.