US at a turning point

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This is now a national disaster for the United States. The centrality and import of inexpensive and available credit to America's function is total.

We have moved well beyond a subprime crisis. We have moved well beyond a financial industry crisis. The position of the US economy is in jeopardy and the employment security and wealth of the nation is now very much in play.

Like the nations of East Asia in the aftermath of the Asian financial crisis of 1997-8, or Eastern Europe after the collapse of the Soviet Union in 1991, our way of economic life - warts and all - is imperiled. No matter what happens as the week comes to a close our lives have changed. Shock waves are emanating out from the debt collapse ground zero. US$3.6 trillion in global stock market wealth has evaporated this week. The job losses and macro effects are not far off.

Over the past 14 months one assumption after another has been proven unsound. Why? We have been waiting and working toward a return of normality. The normalcy of the past six years is illusion. Credit conditions designed to keep the macro-economy and asset prices at peak levels filtered into balance sheet leverage, government debt and consumer debt levels well beyond prudence. This happened because credit easing does not and cannot substitute for earnings, wages or tax revenues.

http://www.atimes.com/atimes/Global_Economy/JI20Dj02.html