From Bear to worse: the outlook is gloomy

How bad is this going to get? After the swift garroting of Bear Stearns over the weekend - sold to JP Morgan Chase, which is paying $2 for shares once valued at $100 - bankers around the world woke up today wondering who will be next.

Will it be Lehman Brothers, the bank whose balance sheet most resembles that of the late Bear? Or Merrill Lynch, which has been struggling for breath for months? How safe is anyone these days? Could even the mighty Goldman Sachs be starting to sweat?

A crisis which began with sleazy mortgage brokers arranging loans for unqualified borrowers across America has now reached the very pinnacle of Wall Street.

The entire plumbing of America's financial system is seizing up and no matter what the Federal Reserve tries, whether it cuts interest rates or opens yet another $100bn credit

line to cash-starved banks, nothing seems to be working.

The gold bugs, an unloved tribe on the edge of the financial system who long predicted a rush to gold as it became clear that America's finances were broken, are now everyone's darling. Gold has crossed the $1,000 threshold for the first time ever and investors around the world are rushing to buy it as a haven from the plummeting dollar.

One of the most prominent of these gold bugs, Jim Sinclair, wrote on Friday that Americans should not just be buying gold but getting hold of all their assets held by financial institutions. Liquidate those pension funds, cash out the savings, he urged. Banks and fund managers weren't to be trusted. You don't want to be the one at the end of the line when the bank run happens.

Sinclair makes gloomy reading, but his predictions over the past year have been chillingly accurate.

It seems almost impossible the US could be heading for a meltdown of such proportions. A few months ago, only the academic