The U.K. government yesterday (Wednesday) announced its own banking bailout package with an $87 billion (50 billion pound) recapitalization plan for the ailing British financial sector.

With the commercial-paper market evaporating – causing its ability to operate to do the same – Morgan Stanley escalated its frenetic search for a well-capitalized partner to help it restore investor confidence. Morgan Stanley shares have lost more than 40% in the past week, leaving Morgan Stanley Chief Executive John J. Mack seeking a tie-up with a commercial bank.

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Analysts are trumpeting the recent drop in oil prices as a step toward normalcy. But is this celebration premature? Or perhaps even misplaced? After all, we all know that over the long haul, energy prices are headed in only one direction – higher.

The British pound fell to a 22-month low, after the Bank of England (BOE) offered a gloomy outlook for the U.K. economy and the chance of an interest rate cut increased.

Two bits of news illustrate ‘the squeeze’ taking place in Britain. I’ll get to them in just a moment — and I’ll tell you what you can do about it. But first, what is ‘the squeeze’?

Gold rose to $933 in late Hong Kong trading yesterday, but began selling off during the London session and continued to do so until late morning in New York, where it bottomed at $913 before rallying back to finish at $919.70/oz., down $6.70. Overnight, gold has been flat.

The chief executive officer of HSBC Holdings PLC (ADR:

You can bet there will be a lot of discussion about interest rates this week, thanks to the release of the producer price index (PPI) report tomorrow (Tuesday) and the U.S. Federal Reserve meeting minutes on Wednesday.

Global growth will slow to 3.7% in 2008, the International Monetary Fund announced yesterday (Wednesday), in its most recent World Economic Outlook. There is also a 25% chance of a global recession should economic growth fall below 3% in 2008 or 2009.