Suggestions to organise a massive bailout of the banks are being floated by central bankers this week-end:

Central banks float rescue ideas

Central banks on both sides of the Atlantic are actively engaged in discussions about the feasibility of mass purchases of mortgage-backed securities as a possible solution to the credit crisis.

Such a move would involve the use of public funds to shore up the market in a key financial instrument and restore confidence by ending the current vicious circle of forced sales, falling prices and weakening balance sheets.

There are more details in that article (including about disagreements between the Fed and the ECB on when the package should be put in place), but two things stand out:

1) the financial crisis is now acknowledged as bad enough to require public intervention;

2) that intervention will require significant injection of public money in bank’s balance sheets.

The western financial system is caught in a trap. On the one hand, there is an urgent need for clearing prices to be established for impaired assets to restore confidence; on the other hand, if this is done in a mark-to-market world, there is a risk that some banks will run out of capital.

(Gillian Tett, Financial Times)

Bank bankruptcies are a realistic prospect in the coming months. And yet, this is not even the worst…

The global economy is facing twin shocks. Natural resource markets are delivering a supply shock of 1970s dimensions, while the financial system is delivering a shock comparable to the bank and thrift crises of the 1988-1993 period.

(Tim Bonds, Barclays Capital, in the Financial Times)

That graph was posted alongside this article in the NYT, and it pretty much captures the unprecedented nature of the credit crisis we’re going through this autumn. In several sectors of the financial world, lending quite simply stopped. Leveraged buy-outs, the big story of the past 18 months, no longer exist. Asset-backed paper is seen as “toxic waste”, and no longer provided – it continues to exist in so far as banks would rather roll over paper that cannot be repaid rather than make all the underlying losses appear in plain sight.

As lending prior to that had been extravagantly exuberant, this is not having an immediate impact for many companies, which have sound balance sheets and advantageous existing credit lines, but as it drags on, the real economy will start to feel the pinch as it needs to finance or refinance its normal activities, let alone investment.

Now that the economy is heading south, worries are being increasingly expressed about the great unwinding, and one sees increasingly frantic attempts to rewrite the economic history of the past few years.

On the eve of the famous Black Friday, one of, or the busiest shopping day in the year, I’d like to point out a column written in the Financial Times, Europe’s main English language business paper, which attempts to spin current worries about the economy on a grand scale. As the author, John Plender, explicitly writes about the “Anglo economies”, I feel it is appropriate to incorporate that in my “Anglo Disease” series (see the links at the bottom for earlier instalments).

This was posted on DailyKos yesterday, but may be worth a read for those of you that have not seen it. It was originally posted on European Tribune.

This is worth yelling louder:

Iraqis say Basra quieter after British troop pullout

BASRA, Iraq (Reuters) – Residents of Iraq’s southern city of Basra have begun strolling riverfront streets again after four years of fear, their city much quieter since British troops withdrew from the grand Saddam Hussein-era Basra Palace.

Political assassinations and sectarian violence continue, some city officials say, but on a much smaller scale than at any time since British troops moved into the city after the 2003 U.S.-led invasion.

The topic has been rehashed to death already, but these diaries, written over the past 2 years, are still pretty much relevant:

Armando is a kind, gentle, caring person
Ultimate meta: civility, dKos ecology and the reclist
Meta: How to discuss constructively with a smart brash kossack

Beyond the text below, I’d like to note one thing: there is nothing that will frustrate a bully more than unflailing civility in the face of continuous aggressivity. Civility actually is very satisfying in fights.

Greenspan alert on US house prices

US house prices are likely to fall significantly from their present levels, Alan Greenspan has told the Financial Times, admitting that there was a bubble in the US housing market.

Now he tells us! Now that, after encouraging the bubble, blowing it out of proportion, and claiming that it was not possible to tell if there was a bubble, said bubble is blowing in our faces as many observers have predicted for a number of years now, he claims that it was obvious all along.

What a lying piece of shit.

Exclusive to DD!