Worst part of credit crunch far from over 

Psychology on Wall Street changed completely this week, to economic optimism and concern for inflation, and assumption that the Fed is done with rate cuts or will be shortly. Low-fee fixed mortgages are 6.375 percent, jumping with all interest rates, long and short. The Fed-forecasting 2-year T-note has soared from 1.7 percent to 2.24 percent.

This week, "credit" appeared only in sentences including this clause: "The worst is over." The worst probably is over for write-downs of the abysmal "structured securities" of the 2001-2007 era. However, euphoria at that prospect masks these things: the financial system is still too busted to function properly; credit is extremely scarce and expensive; the system is terribly vulnerable to recession-cycle credit loss ahead; and inflation here, there and everywhere is forcing global economic slowdown.

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