The next big wave is breaking

The scale of the latest wave to hit, the collapse of confidence in the two government-sponsored entities, Freddie Mac and Fannie Mae, is a harbinger of worse to come in what will be the most devastating financial and economic catastrophe in United States history. The impact will be felt globally.

The Royal Bank of Scotland (RBS), one of the largest financial institutions in the European Union, has warned its clients that "a very nasty period is soon to be upon us — be prepared". RBS expects the S&P-500 index of US stocks, one of the broadest stock indices in Wall Street used by hedge funds, banks and pension funds, could lose almost 23% by September as, in the bank's phrase, "all the chickens come home to roost" from the excesses of the US-led securitization revolution that took hold after the dot.com bubble burst and then Fed chairman Alan Greenspan lowered US interest rates to levels not sustained since the 1930's Great Depression.