Some Wall Streeters are predicting the credit crunch is almost over. If the IMF is right, though, there could be $700 billion more to go. Hope springs eternal on Wall Street.

John Mack, CEO of Morgan Stanley, warmed the hearts of many this week in predicting that the worst of the crunch is over. The subprime crisis is in “the bottom of the eighth or top of the ninth,” he said. As head of a bulge bracket firm, Mr. Mack has ample reason to hope his words are true. The question is whether or not evidence bears him out.

The IMF thinks the full cost of the credit crunch could be $945 billion… just a shade under a trillion bucks. With $232 billion written off by Wall Street so far, that would mean about $700 billion more to go.

What’s more, the consumer effects of the housing bust are still in early days. Bankruptcies jumped 30% in March, with the sharpest rise in uber-bubble states like California, Nevada and Florida. In Orange Country, as many as six out of ten new buyers could be “upside down,” meaning the size of the mortgage exceeds the value of the house. Time magazine talks of the first “Starbucks recession,” in which belts are being tightened enough to pass up that $4 cup of joe. Starbucks CEO Howard Schultz reports that, “For the first time in our history as a company, we have negative traffic this year vs. last.”

In many respects, too, the mortgage troubles are global. The housing news is ugly not just in the U.S., but in other countries like Britain, Ireland and Spain. (Recent Economist headline: “Britain’s property boom turns to bust: prepare for a hard landing.”) This means the flood of printing press stimulus will also grow more global, as we saw with the Bank of England slashing rates this week. Bad news for paper currencies; good news for gold.

Enjoy your weekend,

JL