What happens next?

WW and I have been exchanging views on what is going to happen.
You can be pretty sure the Fed will cut rates this week, but it won't have much of an effect overall. The BofE will have to do the same pretty soon, but, with typical backward looking thinking, it will be too little. It already has been and its far too late. Even the ECB will have to move soon, despite everything they say, otherwise we will all be back to The Good Life in the dark.
The crux of the whole matter is actually an insurance company, once the world's biggest, AIG. If - and I stress if - the line can be held somehow, there could be time for the other broke banks to get merged or closed without too much of a problem. The Bear Stearns takeover already bought enough time for the Fed to be able to ignore Lehman.
The really depressing thing is that the losses being racked up are so large that the potential lending by those who still might is curtailed to such an extent that I doubt we will see any kind of light for at least a couple of years. We are going into another Ice Age financially.
Even if you have a committed line of credit, don't expect it to get rolled over. Typically, it will be cut by 20%, you will pay a significant fee and you will have to pay a higher margin.
And here's a trick. People talk about eg 2% over base - at the moment this would be 7%. Now the banks are talking about eg 2.25% over LIBOR. Doesn't sound like much? Well, LIBOR is not 5% its about 6.5% ( and expected to go higher now - so the actual increase is25%.
Mrs.Lear was putting the dog to bed last night whilst I was dealing with some emails and said," Well, what do we buy - oil ,gold, Government bonds?"
Just leave it in cash - and spread it around. I've told the story before about the fund manager who several years ago only wanted to invest in Bank of England CDs and gold.
And that was physical gold you can touch and fondle, and hold to your chest, not certificates.
In the end, nothing will get better until someone somewhere starts seeing the price of American houses as being of value. They're still falling, but the vultures are out and we can't be too far off the bottom - probably another 10-15% drop overall.
Watch this space.
PS
And don't think about retiring any time soon. The fall in markets means that pension payouts will be falling very fast very soon.
PPS
Henderson Global Investors's Jenna Barnard, in charge of a number of funds including the Henderson Strategic Bond fund, said: 'The fate of AIG will be the key driver of both credit and equity markets in the near-term with the potential to further destabilise markets.'
PPPS
I knew Lehman's was doomed from the moment Gordon Brown opened it's shiny new London offices. What I didn't know was he had performed the same function for Dresdner Kleinwort - defunct a few weeks ago. The Jonah effect never fails....