Oh nos

The economy is continuing towards collapse: credit markets are still completely seized up, with the TED spread at a record high. (See my attempt to explain the significance of the TED spread here.)

Without credit, people cannot buy cars and houses, and businesses cannot cover operating expenses during a slow period, purchase expensive equipment, or expand (and, of course, entrepreneurs cannot get the loans they need to start new businesses). Ultimately businesses are forced to lay off workers, and consumer spending goes down--which in turn causes businesses to fare even worse and lenders to become even more tight-fisted--a vicious cycle that, if left to go past the point of no return, lands us in a bad recession or even depression.

Hopefully the government's $700 billion investment in the financial system will instill confidence in lenders that their loans will be repaid, and there will be enough affordable credit available to break that vicious cycle before it really gets going.