So how bad can it get? How much further down can the markets go? What else can happen?
Well, the easy answer is ‘no-one knows’. The more difficult answer is ‘it will probably be worse than you think’.
This is because we are experiencing the hangover after 10-15 years of accelerating growth in the financial sector. And financial deals are peculiarly, and particularly, associated with confidence.
This year has seen this confidence ebb away, which is why the money markets keep grinding to a halt. However, few of the markets built up during the boom time seem to know how to weather low confidence market conditions.
For instance, the only busy capital market I can see at the moment is the collegiate syndicated loan market, which is a high trust world stuffed full of sensible, experienced bankers. It may also not be a coincidence that these bankers do not receive huge bonuses, but live on their salaries.
So why has the credit crunch gone on and on, and how much worse will it get?
One reason is that few alternative market paths have opened up. Instead, many market practitioners appear to have spent 2008 simply waiting around, hoping that things would go back to how they were.
This has not been a successful strategy, and has certainly contributed to the crisis we are experiencing this month.
Deals do not just happen, they have to be crafted, built up using a keen eye on market conditions and others’ varying incentives. During the boom time, doing deals became too easy –largely because of excess liquidity. The craft of doing deals will have to return before the financial world can restart, and these deals may have to be built on structures that do not currently exist.
Edited to add: This NYT article suggests that the entire structure of the financial industry will change, and so bail-outs that we've seen this week are only (very large, very expensive) sticking plasters.