Ambrose Evans-Pritchard has a really good short analysis of the credit crunch which is coming. It is unavoidable and will be ugly, very ugly. The problems at Bear Stearns lifted the rock exposing the subprime bond market to the light of day - for a few minutes anyway. What was revealed, well, here is what Pritchard says: "When creditors led by Merrill Lynch forced a fire-sale of assets, they inadvertently revealed that up to $2 trillion of debt linked to the crumbling US sub-prime and "Alt A" property market was falsely priced on books.
Even A-rated securities fetched just 85pc of face value. B-grades fell off a cliff. The banks halted the sale before "price discovery" set off a wider chain-reaction."
So now you have everyone understanding that their portfolios of loans are of a much lower value than they are saying, but realizing that if they actually admit this, the market will crash and burn!!
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