I was feeling a bit better having listened to corporate types at Davos say that their businesses still look good, but it was all undone by a real blizzard of negative statements on Saturday.

First off, at least for me, was Merrill supremo John Thain. He said that the credit crisis was beginning another wave, as consumer debt started to have problems. Thain, in one of the bleakest such assessments I’ve ever heard from an investment bank chief:

“Problems in credit markets are spreading to the consumer sector…Credit cards receivables, auto receivables, home equity loans.

“Consumer bankruptcies are up 40 percent in 2007. This will be exacerbated by a rise of unemployment.”

While Thain said he was not concerned about Merrill’s remaining exposure to distressed instruments, you have got to think that banks generally are looking at more pain if the huge credit card and auto loan sectors go the way of risky mortgages.

Also really notable was a comment from the IMF’s Dominique Strauss-Khan, who said that fiscal policy has to “complement” monetary policy, which I took to be a call for fiscal stimulus.

So did former Treasury Secretary Larry Summers, who said:

“We have been present for a mildly historic event. For the the first time in a quarter century the managing director of the IMF has called for an increase in budget deficits and fiscal stimulus.”

These are calls for risky policies by serious people, and I take them, along with the Fed’s intermeeting rate cut, as further evidence that the U.S. economy and the global banking system are in a bad way.

James Saft is a Reuters columnist. The opinions expressed are his own.

(photo: Yuriko Nakao/Reuters)

By Swiss law (and believe me there are some funny Swiss laws) it is illegal to blog about Davos without a funny, lighthearted piece about how rich everybody is. I don’t know why this law came into being, but I imagine it was as a result of international negotiations intended to insert irony and self-awareness into a very self-serious event. It also makes us poor media types feel better.

Here is ours, culled from overheard conversations this week:

I was sitting at a table, blogging, when a man politely asked me if he could sit in an unoccupied seat. After a while, two other men began talking to him very solicitously. It was clear, as these things are, that the seated man was important to the others.

After a time, one standing man said: “You know what his problem is, his jet is too big to land anywhere near here.”

Second standing man: “Why don’t you do like they do on yachts, carry a little plane around inside the big one?”

Stay tuned for more…

Here’s the short version of a panel on private equity at Davos today: smaller new deals, rising defaults on older ones but no re-run of the mass defaults of the 1980s.

“Those (big) buyouts will come back in time, but money over next few years will be made not by doing new deals, but by improving companies they already have,” said Carlyle Group founder David Rubenstein.

“There will be leveraged buyouts (in 2008), but deals will be smaller — most likely $1, 2, 3, 4 billion deals as opposed to $30 to 40 billion deals,” he said on the sidelines.

While there are some meaningful differences to the bad, old days - less aggressive structures and better resourced private equity firms - there are quite a few areas of concern.

The economy is turning sour, recent vintages of deals were highly leveraged in their own right and anyone hoping to refinance to buy time is likely to be disappointed. And while the lack of strong covenents on many deals will give them room to manoevre, eventually you gotta repay debt.

Still, we can all agree the next 18 months will be a very good test of private equity’s vaunted management skills. If they come through this with their reputations and returns intact, they will deserve all the praise they get.

Someone remind me to write a nice story if it happens.

James Saft is a Reuters columnist. The opinions expressed are his own.

Japanese prime minister Yasuo Fukuda got hold of the latest RED special edition ipod released only yesterday before a meeting with Irish rock singer Bono, Microsoft’s Bill Gates and former British prime minister Tony Blair on the sidelines of the World Economic Forum.

But 71-year-old Fukuda will have to learn how to use iTunes: when he asked Bono if his songs were on the ipod, the singer told him: “You can download them.” RED iPod gives a portion of the purchase price to the Global Fund to fight AIDS in Africa.

The World Bank’s president reflects on how the current market turmoil is affecting developing countries.

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Favre gives his view on whether the SocGen scandal has damaged the climate for investing in France.

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Mark Foster, group CEO of Accenture’s business consulting unit, believes there is still a pretty upbeat mood among executives. There may be troubled times ahead, but there’s also an underlying sense of confidence, he says.

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Eric Schmidt, the chief executive of Google, likes to stay connected.

When panellists at a session on mobile technology in Davos were asked to reveal just how many mobile devices they had about their person, Schmidt emerged the clear winner, pulling out a record haul of four - BlackBerry, mobile phone, iPhone and wireless camera.

So much for convergence!

In the future, however, it is all going to get a lot smarter, Schmidt believes. He reckons the arrival of a fully mobile Web will be a “huge revolution”, offering a new generation of location-based applications and lucrative advertising business.

Since you asked, I am convinced that the Fed’s rate cuts, bold as they are, will help but are far from a solution.

The two big issues are credit markets and a falling housing market. Housing in the U.S. has further to fall on a valuation basis, and is taking on a downward momentum just as it did on the way up.

And credit markets won’t be fixed by interest rate cuts; it will require clarity about losses, rebuilding of balance sheets and the passage of time.

One thing that will help is the plan to raise the limit of loan’s that Fannie Mae and Freddie Mac can make by $300,000. With secondary markets for loans not issued by Fannie and Freddie more or less closed, the interest rate cuts were not going to be of much use to a homebuyer in California needing a $600,000 loan. I spoke to Yale economist Robert Shiller, the man behind the Case-Shiller indices of house prices, here at Davos. His take was that it would help, but that housing still faced big falls that might take “years” to resolve.

Beyond the mudslinging against bankers (fraud+subprime=grief), there seems to be a real difference in opinion in Davos about the health of the economy. People from finance are a lot gloomier than many of their peers from industry.

Dow Chemical Co. boss Andrew Liveris, whose customers represent a broad range of industries, sees a soft landing and a possible pick-up for the U.S. economy in the second half of 2008.

“I’d still use the word ‘growth’ — I might put the word ’slow’ in front of it,” he said. “What’s going on now should not have a ‘Chicken Little’ atmosphere. The sky is not falling.”

It strikes me that, while the truth may be some where in the middle, there are reasons to side with the downbeat banking and financial services view.

Corporate chiefs are by nature optimists - that’s a good thing. Naysaying negatavists don’t usually rise to the top of big companies, but can sometimes get work as economists.

It’s also true that optimism at the corporate level usually takes a while to adjust in the early stages of a downturn or recession.

And beyond that, this is a downturn that is coming from finance, and finance really is having grave difficulties.

(Ed’s note: James Saft is a Reuters columnist. The opinions expressed are his own.)