How much more can the financial system take?

The credit markets are not quite seizing up, but there is a lot of nervousness evidence by a big move into short-term Treasuries. The costs of capital are certainly rising for Corporate America. Meanwhile, CDS spreads are widening again, and volatility is increasing. The system is not breaking just yet, but at some point, companies might have troubled funding short-term operations. That will compound an already dire bank situation; more are sure to fail. Across the pond, European central banks are starting to bail out banks, a clear indication that the global contagion has intensified. On top of all that, if more money market funds start "breaking the buck," we'll be in for some real pain, chaos even. What we need is a shot of confidence. It is unclear if a bailout plan, even one that is actually passed into law, will be enough. We are approaching uncharted territory. No wonder central banks are pumping liquidity into the system.  

For more:
- here's a look at the credit markets. Article
- here's an article on European bank bailouts. Article 
- Paulson pledges to continue quest. Article
- Fed, other central banks pumping billions into the system. Article

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