More nasty surprises loom for banks

Sovereign debt may be the new worry, but we haven't heard the last of banks' losses. The IMF recently estimated that there are another $1.5trn of write-downs in the pipeline. Austria's nationalisation of Hypo Bank last week suggests problems have been swept under the carpet, due partly to relaxed accounting rules, says Divyang Shah of IFR Markets.

In America, another wave of mortgage resets, whereby the low initial interest rates on certain mortgages jump after a few years, is due in 2010 and 2011. The $750bn of resets the same sumas in 2007 and 2008 combined are concentrated in self-certified and Alt-A (one step above subprime) mortgages. Get set for "the sequel" to the subprime drama, says Lombard Odier Darier Hensch.

Meanwhile, the Bank of England is worried about dodgy loans to the commercial real estate sector, where outstanding loans have reached £260bn. Moreover, £1trn of British banks' wholesale funding matures over the next five years. Credit is set to remain tight "for the foreseeable future", says Capital Economics.

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The big picture: a new 'misery index'

In the stagflationary 1970s, the 'misery index', which combined the unemployment level and the inflation rate, became a popular indicator. Debt ratings agency Moody's has updated the concept for the post-crunch era of massive sovereign debts.

The group has combined the unemployment rate and budget deficit estimates for 2010. Those countries faring worst are the ones whose economies were artificially inflated by rocketing private sector debt so that the crunch caused a sharp slide in tax revenues opening a gaping hole in the public finances as well as causing high unemployment.

Statistic of the week

To see just how expensive school fees have become, consider their price in gold, says Lex in the FT. A century ago, a private education at a secondary school cost around seven guineas (£7.35 in today's money), or about 1.5 ounces of gold. Now the average bill for a term is £4,000, and Eton costs £9,000. With an ounce at £690, five years at the latter will set you back £135,000 or 196 ounces of gold.