A credit freeze Armageddon building up worldwide ?

Just how dislocated are the share markets  from what is  happening in the world financial system?

Are the fundamentals really sound .

The US has had its economy fuelled by foreign supplied credit for years.

Why are the bank of England  and the US  fed bailing out the banks swapping old bonds for new treasury bonds .

Let  us look at a graph on the credit lockdown from the US Fed on the last quarter - and the situation hasn’t improved since.

A picture is better than a thousand words and clearly the credit supply is not functioning ‘normaly.Capitalism runs on credit.

The report listed below says-

“Indeed, three new official reports are now telling us, point blank, that the credit crack-up is already beginning!

First, the Federal Reserve is reporting a big contraction in short-term debts.

The specifics: Based on its Flow of Funds Report (pdf page 18), we can clearly see that ...

• Just in the third quarter of last year, “open market paper” (mostly short-term commercial loans) was slashed at the annual rate of $682 billion ...
• In the fourth quarter, it shrunk again — at the rate of $337 billion per year, and ...
• This shrinkage doesn't even begin to reflect the impact of the Bear Stearns failure or the huge additional bank losses announced so far this year.

I repeat: This is not a mere “slowdown” in new lending, which would be relatively routine. This is an actual reduction in the short-term loans outstanding, which is anything but routine ... which implies a rupture in the nation's credit spigots ... and which could deliver a new shock to the U.S. economy.

If this represented a planned and voluntary effort by lenders to begin trimming America's debt excesses, it might actually be a good thing.

But that's not the case here, not even close. Rather, this debt reduction is almost exclusively forced on lenders by the pressure of events — the plunging value of mortgages, the surging defaults by debtors, and the huge losses that have caught both banks and regulators off guard.’

The Fed reserve bank  graph is  reprinted  in a commercial analysis reprinted in the economics section at the Russian open publishing news website

http://iraqwar.mirror-world.ru/article/162510

 Commercial Banks Heading for Huge Derivatives Losses- Credit Crisis Turning into Credit Armageddon