There has been some good news in the past week and a lot more bad news. The good news consisted of tentative signs that the credit markets were stabilising. Conditions in the asset-backed commercial paper market also appeared to improve. The bad news was the shocking bail-out of Northern Rock, a UK mortgage bank.

I would nevertheless suspect that within a few months, the banking sector will have absorbed most of the horrible real estate investments and the financial markets will be celebrating an end to the crisis.