Last night the US Senate voted for the Bush bailout plan by a large majority, which should keep the markets happy until the House of Representatives considers the matter again. The word from Capitol Hill is that it is likely to go through on a second vote; but nothing is certain in Washington in an election year and if it fails again the global economy will be on the brink of collapse once more.
The French are now proposing a €300 billion rescue fund for Europe's banks and want it considered at a special summit this weekend. This puts some pressure on Gordon Brown, who's not keen on the idea (and never had much time for Europe's finance ministers when he was Chancellor). He's also angry at Ireland's unilateral decision to guarantee ALL its bank deposits, fearing that will put British banks at a competitive disadvantage (though why he doesn't do the same in Britain is a mystery, since in a crisis he'd have to guarantee all deposits anyway).
Westminster will be watching to see if David Cameron won any bounce from his conference speech, which went down pretty well with the Tory-inclined press like the Sun, whose editorial today is headed "He's ready". The Tories are nervous about the Brown bounce after the Labour conference and want their 20-point lead re-established.
The PM's long-trailed cabinet reshuffle is, we're told, likely to happen in the next few days but it's likely to be much ado about nothing, with the big names staying put (bar, of course, resigning transport secretary Ruth Kelly).
But here's the real backdrop to Westminster politics: even if Capitol Hill does back the Bush plan and the financial markets settle down a bit, the real economy is heading for the rocks. This week we learned that manufacturing output declined at the fastest rate since records began; this morning we find that house prices have dropped by over 12% on last year -- and are still plummeting; and now wholesale electricity prices are surging because of supply fears, which will put further pressure on household bills this winter. We look like heading for a far worse downturn than anybody in Westminster is contemplating, especially Mr Brown.
British politics is now going to have to deal with the new austerity: the risk for Mr Brown is that he will be blamed; the risk for Mr Cameron is that people won't think he's up to it; the risk for the Lib Dems Nick Clegg is that he'll be regarded as irrelevant. How all three handle these risks will determine the next election.