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The media took a break from the global financial crisis last week as banner headlines focused on elections here, elections there, talks with Syria, Olmert's problems, Gaydamak's problems and an interview with Yigal Amir - in short, a normal week. Even the stock market managed to finish a few days with higher numbers.

Truth be told, however, nothing has settled down, and the bourse's recovery is deceiving. Everyone's biggest bane is the bond market, which continues to tumble, and in recent days its situation was exacerbated by government bonds, which until now had been stable.

The decline in the prices of corporate bonds, which are a component in provident fund, pension fund and executive (whole life) insurance portfolios, is the main culprit in the shrinking of the public's long-term savings by 25% - including a loss of 8%-12% in October.

Our pensions have close to 60% exposure to corporate bonds, which are sinking like a lead weight. At the current rate, we will end 2008 with a 40% decline in our pension savings - a loss that will take a long time to recoup, especially for older people who are approaching retirement age or who have already stopped working. These people will have to tighten their belts considerably.

Senior market players are worried by the weak showing of the economic leadership in Jerusalem. The headlines may be heralding the Finance Ministry's "rescue plan," but we are no closer to a solution (a demand that the funds report on their exposure to the corporate tycoons is not a significant step toward a solution). In the meantime, treasury and Bank of Israel officials including Zohar Goshen, Yadin Antebi and Rony Hizkiyahu are meeting, brain-storming and deliberating, but with no practical results.

All the governments in the West already realize that the market forces cannot stop the avalanche, and they have infused their economies with fantastic sums of cash and are taking legal measures - all in order to prevent a total collapse of the capital markets and the financial systems. And it has worked.

Of course, governments around the world have not solved all the problems, but they have contained some of the damage. Here, too, we cannot expect some regulatory exercise or a one-time infusion of cash by the state to rescue our pension funds, but such measures can help reduce the damage and calm the public's hysteria and lack of faith. In the short term, this lack of faith can spur the public to redeem its savings, making matters even worse. Even fund members who retain their savings but switch from general funds to more solid investment tracks (closed deposits and Makam short-term loans) do nothing to help the bond market.

When fund members receive their October statements, these could spark another hysterical wave of redemptions that brings the financial crisis back into the headlines. After all, it is already clear the people who did not heed the experts and pulled their money out in September saved themselves further losses.

The treasury cannot expect the problems to solve themselves; indeed, this has not happened in any other country. In recent weeks senior executives in the business sector have offered the treasury many suggestions for putting the capital market on a more positive track. One idea was rejected because, "the legal advisors won't like it," and another because of "public criticism." A third "cost too much," and a fourth was too complicated.

Events in the financial system impact other sectors, and the effects are already evident. Insurance companies, for example, are down to their minimum required capital and are looking for secondary sources of capital - no simple task. The banks are in no hurry to approve loans and have practically stopped extending credit to companies. If this situation continues, some companies will be unable to pay off their debts.

There is a possibility that even if nothing is done, everything will suddenly right itself, and the terrible losses will not balloon further. If only. There is also a significant risk that there will be another wave of declines, and efforts should be made to prevent this. Clearly, any immediate action will be cheaper and more effective than intervention in the middle of a massive move toward savings withdrawals and bankruptcies, which would wipe out huge chunks of the public's savings.