It would be foolish to oversimplify by saying that the US has too long been focused on foreign oil, but this is one of the catalysts. I have wondered for many years why we delude ourselves by continuing to rely on fossil fuels.

If we are to survive (financially, environmentally, and in peace) as a species, we as a world must find viable, affordable, and clean alternative fuels.

I have wished that the US government would undertake this endeavor and share what is learned with the entire world. We cannot survive for long this way.

mark newman, Knoxville, US/TN

Re: Underlining the Fed’s desperate attempts to calm markets, for the first time it said that it would accept mortgage-backed assets as collateral from the banks for fresh loans.

This little piece of misinformation has been constantly repeated in the US media. I am shocked and saddened to see this mistake yet again in this august publication.

The Fed has not changed one iota, in any way shape or form, the rules on the collateral they will accept for loans, either via repurchase agreements in Open Market Operations, the TAF, or at the Discount Window.

The Fed has ALWAYS accepted mortgage backed securities as collateral for repos, and both mortgages and MBS as collateral for the Discount Window. The TAF follows the same collateral rules as the Discount Window.

Lee Adler - The Wall Street Examiner, West Palm Beach , USA/Florida

Carlyle group was 30 times levereged? Have we not been here before in 98 with LTCM? Did the banks that offer prime brokerage services learn nothing then?

john arnesen, london, uk

Collapsing? the U.S of A itself!
I consider simply ignoring the state of the economy in the U.S. because within a way lesser amount of time it will be irrelevant to the world economy as a whole.

Thaddy, Amsterdam, the Netherlands

I note the misstatement in the article about unemployment increasing when it actually decreased, as correctly pointed out by “saud, riyadh” in the first comment posted above.

Those who think China, Russia or Europe will benefit from an economic crisis in the United States are sorely mistaken: as goes the American economy, so goes the world economy.

Any downturn or recession or crisis in the American economy will result in a downturn or recession or crisis in every country that participates in the world economy – and in most countries the negative repercussions will be more severe than the situation in America.

Only fools will be laughing.

Pericles, New York, NY

I think the US economy went out of control.

F B, London, UK

Earn $1 and spend 0.99c and sleep at night. Earn $1 and spend $1.01 don't sleep at night. We all know that. Greed blinds the eyes of all who will not see, great and small!

Eric Bebington, Hervey Bay, QLD Australia

One may wonder whether the $200 bn will be sufficient to continue to oil the wheels of pending deals, and guess whether further injections will be needed, and if so, whether of escalating or diminishing amount.

Shrinkage of hedge funds may seem a surprising outcome in view of the expertise deployed, but it could be further evidence that mass delusions are as capable of migration from small crowds of individuals to financial institutions as to political mass movements of the past..

dr venables preller, Warminster, UK

Mrs Smith, your comments are intriguing. Please elaborate.

JT from Austin, not sure the answer to that, but Citigroup's market cap has fallen from $260bn to $110bn in 3 months. Scary stuff !!

Derek

Derek, Cape Town, SA

List of US financial institutions on the verge of collapse...well lets see: Countrywide is now being investigated by the FBI (todays WSJ suggests their losses are higher than reported). Look for BoA to make a hasty retreat from their agreed upon takeover for material changes. Citi Bank is looking for more capital and Congress seems to resist overseas (meaning Arab or Chinese) wealth funds from providing said capital. Merrill Lynch and Bear Sterns look unstable, WaMu and Wachovia are having all sorts of legal issues. Remember how quickly Enron went from being the #8 company in the US to being bankrupt, and then the subject of criminal and civil lawsuits. These next few months are going to be very interesting. Whoever wins the presidency in November is going to have to focus on a major financial meltdown. Whatever we think currently W's legacy is I predict it will be for presiding over more wealth the destruction of trillions of dollars of accumulated wealth, and the collapse of Wall St.

Tim, Chicago, USA

It amazes me how astute overseas folks are in their understanding of the US economy. Jingoistic "America's the Best" rhetoric aside, and with very little respect for the Texans we're forced to accomadate, observers outside America are right on: the US economy is on the verge of freefall, because corporations have plundered employee retirement accounts, and initiated many tools to give themselves all the marbles. The rest of us are already broke and through being frightened: there's nothing left but illusions and myths about America's controlled capitalism that we're forced to swallow! When I see the Fed devaluing the money in my paycheck, and the rich getting tax kickers, and the poor told they'll be forced to pay more for their basic needs, then you know the end is nigh! Japan in the 90s: oh, no! America does everything with overblown enthusiasm...look for a real debacle of historic proportions coming very soon! Japan's bubble? Puh-leez!

Robert McMasters, Portland, Oregon

Fed has promised to distribute taxpayers money to the financial businesses and to cut interest rates until Usa-inflation has wiped out the debts.
That's how I understand the future developments

p.kummo, Takakorpi,

Which "major financial institution" is in danger of collapsing?

JT, Austin, TX, USA

correction--unemployment actully fell to 4.8 from 4.9
130 points drop in the dow is really no big deal the nasdaq was up
dollar weakness is good for us and eu economy
no major bank will fail
so it is not that gloomy

saud, riyadh,

Perhaps now the media will break its complicity with this corrupt government and start reporting the real reason for the financial tsunami; the failure of this administration to honor its agreement to pay the Regan/Mitterand Protocol funds. In 2006, this administration agreed to pay $4.5 trillion of the original amount of $27.5 trillion accumulated under the protocols that belongs to the AMERICAN PEOPLE that had previously been held in banks all of the world, off books. When this agreement was made in 2006 this meant that all involved would have to make "on book" transactions that would force disclosure. Without the payment of these funds, almost all of the banks involved were exposed to capitalization problems. Hence the financial blowout, erroneously attributed to the "subprime mortgage mess" instead of the real culprit, our deceitful government. Ask your media to START TELLING THE TRUTH if you want to save our nation.

Mrs. Smith, Chicago, Illinois

The Fed must be really panicking now, the house of cards is collapsing and there is little anyone can do to stop it. You can’t buck the market, even if you happen to be the Fed, the sums involved and the financial instruments put in place are beyond anyone’s control.

Russia and China must be looking on with great amusement.

Keith, Ashford,

This situation resembles a house of cards.

Costas, Larnaca, Cyprus,

Is this the 'Kondratieff winter' - a credit implosion that will bring a severe deflation? Or will the continued massive reflation by the Fed lead to hyperinflation?

michael clarke, london, uk

A trillion dollars in new capital for the banks is probably about right. That compares with the market cap of the US stock market of about $14 trillion and US GDP of $13 trillion. But we can also expect a fall in house prices of about $4 trillion, assuming a 20 percent over all fall from their peak. This will reduce consumer purchasing power by at least $2 trillion.

Look for an ugly recession on the scale of Japan's in the 1990s.

oldasiahand, Guildford, UK

And what about the hundreds of millions the hedge funds have made over the years - did they not keep some of this back for a rainy day or to reinvest. The answer is simple all that money is happily sitting in an account in Geneva - no doubt with very little tax having been paid - these people are not stupid - next year they will re-emerge with a new company but not a single penny of their own will be at risk again. Its the poor mug at the bottom of the pile - you and me - who will pay for all this mess with our pensions, houses and futures sold down the river.

harry, warwick, england

I have to agree. This cat is out of the bag. We can stop worrying about what caused the crisis now, because what happens next is a cascade of defaults as the failure of one institution leads to the failure of one or more of its creditors.

The credit bubble grew through leverage. One Dollar on deposit at a bank enabled it to lend ten. One Dollar in assets in a hedge fund allowed it to borrow ten.

Now we will watch leverage work in reverse. Each Dollar in impairment at a ten-to-one Hedge Fund will wiped out a Dollar of its shareholder's assets, because its ten-to-one debts must still be repaid in full. Each Dollar withdrawn from a Bank will lead it to call in Ten Dollars in loans.

Ironically, bad residential mortgage bonds really only set the ball rolling. It could just as easily have been commercial building loans or the sovereign debt of some over-stretched country. Credit depends on confidence, and it is confidence that is evaporating. No confidence, no price.

jon livesey, Sunnyvale, CA/USA

Wasn't this just §100 billion yesterday?Wow,thats inflation,no wonder the dollar is falling.Looks like its going to be a Black Monday on both sides of the Atlantic where the storm is gathering strength.

stephen hulton, eure, france