"So after a brief period of complacency – if not delusional optimism that the worst was behind us – a painful reality check is setting in. Fed Funds easing and new liquidity facilities (TAF, TSLF, PDCF, Swap lines) cannot resolve insolvency and credit problems that go well beyond illiquidity.
A contracting economy, falling employment for months now, the worst US housing recession since the Great Depression, collapsing home values, millions of households underwater with an incentive to walk away, a shopped out and saving-less and debt burdened US consumer buffeted by falling home prices, falling HEW, falling stock prices, rising debt servicing ratios, oil at $130 a barrel and gasoline at $4 a gallon, collapsing consumer confidence and falling employment are taking the toll on the economy, on financial markets, on banks, on the shadow financial system and on money markets and credit markets. We were in the eye of the storm rather than past the storm; and the recent events and developments suggest that the worst is ahead of us, for the economy, for equity markets, for credit markets and for money markets."
