The US Federal Reserve bank also announced rate cuts reducing its rates from 2% to 1.5%. As part of the $1.23 trillion rescue package, the British Government said it would invest pound stg. 150 billion ($364.3 billion) directly into banks, establish a pound stg. 200billion special liquidity fund and guarantee pound stg. 250 billion of bank-to-bank loans.

The move was designed to prevent the banking and credit crisis from reaching the real economy. The move did not prevent a decline on the London exchange which fell 6.5% but recovered by the end of the day posting a decline of only 2%. On Wall Street the Dow opened down 2.08%. The International Monetary Fund cut its world growth projections to 3% and predicted growth of industrialized countries to near zero warning that it could fall even further. Developing countries are expected to maintain "reasonable" growth levels. The IMF still believes the world will avoid a recession but warned of increasing risks.

In its world economic outlook the IMF said, "The world economy is now entering a major downturn in the face of the most dangerous shock in mature financial markets since the 1930." The IMF also warned that if credit markets continue to deteriorate that "the implications would be a considerably deeper US recession and only a gradual recovery thereafter, with similar if less intense effects elsewhere."

In Asia markets plunged and in Tokyo the Japanese Prime Minister Taro Aso said that losses were, "beyond our imagination." The Australian share market posted record losses and has lost 12.5% of its value in two weeks. Many economists believe that the massive US bailout would have no immediate effect on the world economy.

Despite the multi billion dollar bailouts in the US and the UK markets remain fearful. The credit crisis is starting to have ripple effects into the real everyday economy. Many large US corporations find themselves unable to arrange funds needed for basic working capital. The credit crunch is already having an effect on the already beleaguered US auto industry with consumers unable to secure auto loans.

In today's chaotic economy the only good news seems to be the strength of the US dollar. The dollar has been holding steady against a basket of other currencies and Forex markets seem to be the only place left where investors can actually realize a profit.