Doom is Busting Out All Over

2008 will go down as one of the wildest years in financial history, having witnessed two huge earthquakes that have reordered the political and economic landscape, just as surely as the collapse of the twin towers did on 9/11/2001.

One shock in 2008 was the meteoric rise in energy prices, which crested just shy of $150 a barrel in the summer, followed by an equally bloodcurdling descent. Whole US industries--airlines, trucking, housing, autos--responded in the summer with a near death experience.

Following this oil shock was the cratering of various markets in September and October, which brought to a sudden new intensity the bear market in just about everything that began in the last part of 2007. Commodities, seemingly exempt, succumbed in August after oil prices peaked in July. Emerging markets crashed. Europe crashed. Latin America crashed. Asia crashed. And, of course, so did the good ole' USA.

The dark specter--a return of another Great Depression--seemed suddenly to be decidedly more than a remote possibility. It would be a capital historical irony for that to happen, for US officials have for three generations taken the avoidance of that experience as their lodestar. At least, that is what they thought they were doing. Yet there it was again, big as life and twice as ugly, baying at the door.

Scary times.

The charts that follow in this chapter on financial stress provide a sketch of the havoc now ongoing. Then we'll look to causes, consequences, and remedies.