– The credit crisis has spread. Over the weekend, Germany issued a blanket guarantee of consumer bank deposits. The German government also bailed out lender Hypo Real Estate Holding AG that was close to collapse after private lenders pulled out of an their own bailout plan.

– European stocks are getting trashed. According to the Financial Times, “Dizzying falls across the [financial] sector came across the continent and led to big overall losses on leading indices.”

– There are calls for a European-wide fund to recapitalize banks. So far, European governments are acting individually to stem the crisis.

– Iceland, meanwhile, has suspended trading in banks before the bell this morning.

– Asia-Pacific markets have tumbled. The Nikkei 225 dropped to the lowest in four and a half years. Meanwhile, the MSCI Asia-Pacific ex-Japan stocks index was on track for the biggest daily decline since January 2008, down 5.3 per cent.”

– US stock futures have also dived. “S&P 500 futures fell 29.7 points to 1,078.60 and Nasdaq 100 futures fell 34.5 points to 1,443.00. Dow industrial futures fell 264 points,” according to MarketWatch.

– “We now believe national recessions in the US and the UK will be deeper and longer than previously forecast,” said Larry Hatheway, an economist at UBS in London. “For the first time, we also anticipate recession in the euro zone.”

– Oil is down below $90 a barrel this morning. It’s the lowest price per barrel in eight months.

– Gold futures are up more than 3%, however. “Gold for December delivery rallied $27.10 to $860.30 an ounce in electronic trading on Globex,” according to MarketWatch.

– According to gold bug Ed Bugos, the yellow metal should skyrocket on recent massive expansion of bank credit by the Fed. This from Agora Financial’s 5 Min. Forecast:

The Federal Reserve has just expanded its balance sheet more in one month than it has in almost all of its first 86 years of existence. I am not kidding. Its assets, which represent the cumulative reserves the Fed has ‘created,’ totaled less than $700 billion at the turn of the millennium, and continued to expand by about $50 billion per year after that, up until this month.

In September alone, reserve bank credit inflated by almost $600 billion. It is a record, and has already affected the monetary base.

Up until September, the Fed has been careful to sterilize its liquidity provisions by selling Treasuries or reverse repos or simply by lending its securities off balance sheet. So while it has extended credit since August 2007, it has not monetized much of the liquidity. But the NET factor of increase to reserve bank credit for the month of September was about $170 billion. That is money created out of thin air… unsterilized.

This number is unprecedented. It is difficult to predict gold’s short-term response to this shock, but the market cannot ignore the fundamental effect of this crackup for long. With interventions like this, we should get a few more $100-up days soon enough.”