I'm writing this at the end of a 72-hour period which has been the weirdest time I can remember in financial markets.
The merger of Lloyds TSB and HBOS to create a high street uber-bank, with the competition regulations bypassed. AIG bailed out by $85bn of US government funds. $100 bn pumped into the system by central banks to provide extra liquidity. And suggestions that the US government itself may have its credit rating downgraded due to the huge extra liabilities it has taken on.
The whole system seems to be on the verge of collapse, held up by a variety of sticking-plasters pasted on by the increasingly desperate policymakers. Unless confidence returns to the market in the next few days (and is there any particular reason it should do?) it looks to me like the US government will end up nationalising most of the American banks. Paul Krugman's blog has more detail on the US situation, including the remarkable statistic that the interest rate on 3-month Treasury bills has gone negative. Does that even make sense? Why would someone hold an asset with a negative rate of interest? Perhaps because there is a small risk that the US financial system might collapse? But then, wouldn't US Treasury Bills be worthless too? On the face of it, it doesn't make sense. But in any case it looks 'real bad'.
Big news on the Telegraph site (which I'm increasingly turning to as it seems to update more quickly than the BBC) - the FSA has banned short-selling of stocks by hedge funds and other investors. But that's a bit like insulating your house by closing the door while leaving all the windows open. Short selling is only one mechanism by which prices are driven down. Actual selling of stocks by the people who own them can do just the same thing - and presumably can't be outlawed without outlawing all transactions. Russia has indeed done this temporarily by suspending its stock market.
These are insane times. Grab food, clothing and a selection of items to barter; at this rate you're gonna need them.