Jonathan Pierce at Credit Suisse — itself in the wars over structured debt obligations — thinks that Barclays is facing a near £10 billion ($20bn) of losses if it follows Royal Bank of Scotland in adopting a conservative estimate of its mortgage assets.

RBS declared £5.9 billion ($12bn) last week and has opted for a £10 billion request for cash from its shareholders.

Barclays will, we understand, keep its losses confidential.

It looks like blue-chip Barclays will be the next major bank to announce a rights issue, or look for outside investors, possibly from the sovereign wealth funds of the Middle East or Far east.

Yet another huge loser in the American subprime mortage market is set to announce big writedowns next week.

Royal Bank of Scotland (RBS), Britain’s second largest bank, is understood to be seeking to raise capital from its shareholders in a rights issue thought to amount to £10 billion ($20bn), which is probably the biggest rights issue ever demanded in the UK.

The bank, which bought troubled NatWest and ABM Amro, has been running on low capital ratios for quite a while. It also has major exposure to subprime debt instruments. It has been linked with Spain’s Banco Santander for many years.

When such a major player is caught short like this, it brings home the extent and depth of the crisis in transatlantic financial markets, with all the knockon effects to the rest of the world.

Vince Cable, a spokesmen on Treasury matters who carries more weight than the Treasury these days, believes all the banks should follow the example of RBS, since they will need a great deal of liquidity from the Bank of England and that should be underwritten by shareholders, not taxpayers.

We await next week’s announcement, which will surely be leaked over the weekend.

As the first wave of the credit crunch plays itself to a messy conclusion, we are almost certainly now into its second leg.

Collateralized debt obligations (CDOs) may have been the opening gambit, but credit default swaps (CDSs) are the new kids on the block.

George Soros estimates that the value of CDSs now equals half of the U.S.’s household wealth, an almost unimaginable number — let’s call it $23 trillion. So what are CDSs?

They are hedges made by investors in case a company defaults on its debts. In effect you bet on a company failing to protect your investment in the event it does just that.

The problem arises when large numbers of companies go bust and the CDSs themselves become worthless since no-one can pay them out.

A CDS seller undertakes to compensate a buyer if a corporate bond defaults. Since there is no limit to the size of cover taken out, the value of CDSs often exceeds a company’s debts.

Moreover, many CDSs are bought with borrowed money so the infection of the system drives deep into the financial heartland like veins in a blue cheese.

As defaults rise to unprecedented levels, so the whole ricketty system threatens to collapse.

Another nightmare to look forward to.

This article is adapted from a piece which appeared in Syntagma on February 27.

We’re talking about the American economy, of course — now in recession, as we’ve been predicting for months — and the British and European financial positions, which are trailing some way behind the U.S., but about to implode too.

We’ve been on the case since last June when the ominous tag “credit crunch” started to be bandied about in response to falling American house prices.

As online publishers we are partially protected from the ravages faced by bricks and mortar operations. Even so, Google responded to the same data last year by dumping lots of small publishers using its AdWords/AdSense programs and its range of offshoot partnerships.

The knock-on effects lowered the earning power of a whole raft of mid-sized publishers who operate below the glass ceiling of scalability needed to challenge the giant press barons of the print media.

Given the power of this pincer movement, how should internet marketers and publishers ride out the troubles ahead, which may even include another dotcom crash?

Here at Syntagma we are developing two new business models which don’t depend exclusively on Google rankings and big investment in assets. We have also moved to conserve cash, now the most sought after commodity in global financial markets. Forget equities, bonds and angel lending. Asset-backing is truly out of fashion. Only cash and gold will do during the next two to five years, or maybe even longer than that. Japan took more than a decade to haul itself out of its banking crisis and the profound deflation of the 1990s.

I really don’t see how mid-sized businesses, with heavy debt, and/or lots of equity in the hands of VCs, can get through this otherwise.

The Fed’s dramatic easing of monetary policy, which still has some way to go, is barely making an impact, although the usual lags apply. In the 1990s, Japan found that zero, even negative, interest rates could not persuade its reluctant public to splash out in the shops. Longer term rates in the U.S. are already close to zero.

Ben Bernanke is apparently studying the Japanese experience of zero rates right now. Surely a sign of what’s to come.

The game now appears to be out of the hands of the authorities whatever they decide to do. Bernanke deserves credit for at least trying. His next move will surely be to throw the kitchen sink at the problem and let the Devil take the hindmost. This is no time for musings on “moral hazard”, the hazard is not inflation but deflation and slump. Massive U.S. Government loans to individual defaulters can’t be ruled out and may be just around the corner.

Compare that to the lethargic approach of the Bank of England and the European Central Bank. Still holding rates at 5.25 percent and 4 percent respectively, although the BoE has little room to manoeuvre thanks to Gordon Brown’s obsession with public-sector spending.

The first casualties could be some major institutions in America and monetary union in Europe, where the euro currency is looking very vulnerable. At least Brown got that right.

Syntagma predicts we are going to be amazed by developments in the not too distant future. The world may look a very different place when we come out of this, and it won’t necessarily be all bad news. Bubbles have to burst. Nature demands it. And the end of the eurozone would be a big plus for European freedom.

Nearly a year ago I wrote a post called These are the good times. They were and still are, uncomfortable though the ride may be.