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By Dan Denning

Buckle up, buttercup It's going to be a wild ride, says Dan Denning for The Daily Reckoning Australia.

First, we need to establish exactly what happened over the last three days with Bear Stearns on Wall Street. Next, investors must ask Who's next? to see creditors and clients flee the investment banks. (The answer may surprise you...)

We'll also tell you what else you can expect the Fed to do this week.

Most importantly, we must ask what are the investment consequences of the events of the last four days. It's not just a question of who has the most to lose. We already know that. Everyone stands to lose a lot, most of all highly leveraged investment banks, asset managers, hedge funds, and speculators.

But there may be a few surprise winners in the currency and commodity markets.

Bear Stearns' Bust: The biggest losers

The biggest losers will be consumers everywhere. Global monetary policy is entering a new, highly accommodating phase. That means real interest rates are headed below zero. So if you think inflation is out of control now, wait until you see what happens next.

But first, the story from the Street, where Bear Stearns was on the receiving end of an indirect loan from the Federal Reserve on Friday. Though Bear is the fifth largest securities firm in the US (and the ninth largest bank in the world), it's an investment bank, not a commercial lender. The Fed can't loan directly to investment banks, so the loan had to be routed through a willing third party in this case, J.P.Morgan.

It turns out that last week's big $200 billion loan facility was probably set up to make this three way transaction possible. The Fed loaned to Bear via J.P.Morgan as Bear's investors and counter parties deserted it last week.

The loan was designed to give Bear time to explore strategic alternatives before the run on its assets left it insolvent. Bear saw some US$17 billion in customer withdrawals last week, according to Bloomberg. Once the perception took hold that the firm was in an irreversible slide, nothing but direct Fed action could stop it.