Merrills realeased another $9bln from trading losses and decided to fire 4000 people who probably never made a trade in their life. That brings the total for 3 quarters to $29bln, a not insignificant sum.

Citigroup was in there as well with another $5bln loss for the quarter and another 9000 jobs to go in addition to the 13000 already on the streets.  Naturally the stock rallied…phew only $5bln!

It’s interesting to see how far this continues because this isn’t a good show at all. The numbers just keep getting bigger and bigger. Citigroup still has $60bln worth of exposure to sub-prime and other loans. What worries me is the 7.7% Tier 1 capital adequacy ratio.

That is what this is all about. Leverage to the hilt and be damned. Banks have become nothing more than licenced fronts for gambling.  Fair enough but that isn’t why people deposit their money in them.

Safe as houses? Well that depends what the house is worth.

It’s astonishing but not entirely unexpected. The British taxpayer is the proud owner of the Northern Rock and 100bln worth of loans. It’s a sad reflection on the state of the UK banking system that they can’t find a buyer for this.

But this simply hastens the decline of the banking system as we know it. In 10-20 years time we will look back on this and see how important this moment was. What the banking system or indeed money looks like remains to be seen but our trust in current arrangements must be questioned.

More importantly for football fans is the Northern Rock’s sponsorship of Newcastle. Surely the taxpayer won’t be happy about this. Supposedly the sponsorship is safe but they said that about Northern Rock.

Well Christmas brought some quiet stability to the markets but the New Year has seen an immediate stampede for the exit. What is so interesting about the current economic malaise is that it’s very hard to analyze with any clarity. No one really knows what is going to happen because we’ve never had a crisis of this magnitude before.

We know the credit bubble has well and truly burst. We’ve seen it before with Japan but that was really a closed market and the response was non existent thus causing a 15 year depression. We have Central Banks who are very keen and swift to act but will their actions just make things worse. Henry Paulson today said a correction was inevitable given the price increases of the last 5 years.

Nice to know the guys running the country are on top of things….crickey! Can anyone explain what a stable economic system looks like. Clearly the current bunch of economic leaders haven’t got a clue.

Ambrose Evans-Pritchard argues that we are experiencing a 1929 type situation. I think he is spot on. The bailouts we’ve seen recently could well become more widespread. If that happens then quite clearly the stock markets will fall another 10%. The impact on BRIC (Brazil, Russia, India, China) will decide whether the global financial system collapses or not.

Immediate rate cuts will be forthcoming from the Fed, BOE and maybe even the ECB. All this nonsense about watching inflation needs to be ignored. Inflation will keep being a problem but its a diversion. 2 years out and land prices could be off by 30% or more.

Investing now is for the brave hearted, foolish and very wealthy following the maxim “The way to make a small fortune is to start with a large one”.