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• Germany's economics minister warned that, to save the euro, Greece might have to go through some sort of "insolvency procedure." Bloomberg News promptly reported that there is now a "98 percent" probability that Greece will default.
• An Italian bond sale went badly, forcing Italy's borrowing costs sharply higher. Investors were heartened, however, by the news that Italy's foreign minister was begging China to bail out the country with a significant investment. This was the same foreign minister who had previously warned against China's "reverse colonialism."
• The price of insuring against the default of bonds issued by Portugal, Italy and France jumped.
• Bank stocks in France tanked. French banks own about $57 billion in Greek debt -- and much, much more in Spanish and Italian debt.
• German Chancellor Angela Merkel smacked down her own economics minister, and declared that she wouldn't allow Greece to go into "uncontrolled insolvency."
• "I think we will do Greece the biggest favor by not speculating much, but instead encouraging Greece to implement the commitments it has made," Ms. Merkel told RBB Inforadio, a public broadcaster in the Berlin region. "What we don't need is unrest in the financial markets -- the uncertainties are already big enough," she said.
• Merkel's promise calmed the waters -- for the moment. French bank stocks -- and the U.S. stock market -- suddenly rebounded.

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The Dow Jones industrial average fell 419 points -- a return to the wild swings that gripped the stock market last week.

Stocks were only part of a dramatic day across the financial markets. The price of oil fell $5, gold set another record, the 10-year Treasury hit its lowest yield, and the average mortgage rate fell to its lowest in at least 40 years.

The selling began in Asia, where Japanese exports fell for a fifth straight month, and continued in Europe, where bank stocks were hammered because of worries about debt problems there, which have proved hard to contain.

On Wall Street, the losses wiped out much of the roughly 700 points that the Dow had gained over five days. Some investors who bought in the middle of last week decided to sell after they were confronted with a raft of bad news about the economy:

-- More people joined the unemployment line last week than at any time in the past month. The number of people filing claims for unemployment benefits for the first time rose to 408,000, or 9,000 more than the week before.

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Most bank stocks across Europe were underperforming in already fragile markets, with British bank Barclays and French bank Societe Generale leading the way down, ending the day with losses of 11.5 and 12 percent, respectively. Germany's Commerzbank fell 10 percent.

Analysts said the plunge seemed to be, at least in part, a reaction to increasing signs that banks are struggling with liquidity -- or access to the cash they need to run their day-to-day operations. Banks typically fund their activities with very short-term loans, and the seizing up of the credit markets where they get those loans was one of the hallmarks of the 2008 crisis. First banks refused to lend to one another, and eventually companies and consumers weren't able to get loans.

A number of European banks are already dependent on last-resort credit from the European Central Bank because of a reluctance among financial institutions to lend to one another since many are heavily exposed to bad debt like that of Greece, Portugal, Italy and other foundering countries.

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The European Union's markets supervisor, the ESMA, announced the move late Thursday night after boosting surveillance of stormy markets earlier in the day. The move capped two days of whipsaw trading that saw French banks' market value fall and rise by billions of euros.

In a short sale, a trader hopes to make a profit by betting on the decline in the price of a share. The practice has been blamed for contributing to market volatility.

The ESMA said in a statement that the four countries "have today announced or will shortly announce new bans on short-selling or on short positions" as of Friday.

The French market regulator, the AMF, announced late Thursday that it is banning for 15 days net short-selling on 11 stocks, including those of banks Societe Generale, BNP Paribas and Credit Agricole and leading insurers.

Belgium's market authority said it would ban short-selling on financial shares such as leading banks and insurers as of Friday. Belgium had already banned naked short selling, basically a bet on a decline in the price of a share without borrowing the share, since August 2008.

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Fewer Americans joined the unemployment line last week, and a technology bellwether said revenue could grow faster this quarter than analysts expected. The news is pushing down prices on long-term Treasurys down, and gold is down from its record high.

The Dow Jones industrial average is up 423 points Thursday, or 3.9 percent, to 11,143. It's the first time the Dow has ever had four straight 400-point days.

The S&P 500 is up 51, or 4.6 percent, to 1,173. The Nasdaq is up 111, or 4.7 percent, to 2,493. All three major U.S. stock indexes are down at least 1.6 percent for the week.

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The Dow Jones industrial average is down 519, or 4.6 percent, to 10,720. It's the third time in the last five trading days that the Dow lost more than 500 points. The S&P 500 is down 51 points, or 4.4 percent, to 1,121. The Nasdaq is down 101, or 4.1 percent, to 2,381.

European bank stocks fell on worries that the region's debt problems are getting worse. That pulled down U.S. bank stocks. Financial stocks in the S&P 500 lost more than 7 percent.

The drop erases Tuesday's big gain following a Federal Reserve pledge to keep rates low. The Fed said it expects the recovery to remain slow.

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The Fed's surprise announcement Tuesday that it would likely keep its Fed funds rate at near zero percent through 2013 to help the ailing U.S. economy fueled a late Wall Street surge -- the Dow Jones industrial average rallied 6 percent just in the final hour of trading, one of the biggest turnarounds ever seen.

That continued into Asian and European trading sessions Wednesday, although traders remained nervous after the market turmoil of recent weeks, which has sent many global markets officially into bear market territory -- falling 20 percent from recent peaks. That nervousness became more acute as the U.S. open loomed and European markets gave up all their earlier gains.

"So far, panic has eased but fear remains," said Kit Juckes, an analyst at Societe Generale.

In Europe, the FTSE 100 index of leading British shares was down 1.4 percent at 5,093 while Germany's DAX fell 2.5 percent to 5,814. The CAC-40 in France was 2.5 percent lower at 3,098.

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It was the worst day for the market since the financial crisis in the fall of 2008 and extended Wall Street's sudden, sharp decline. Stocks have lost 15 percent of their value in just two and a half weeks.

Monday was the first trading day since Standard and Poor's downgraded the United States' risk-free credit rating, and the selling started at the opening bell. The Dow dropped 250 points in minutes. For the rest of the day, investors looked for safer places for their money. With few buyers left for stocks, the market could only drift lower.

The Dow finished the day down 5.5 percent. The point decline was the worst since Dec. 1, 2008, and the sixth-steepest ever. The average ended at 10,809.85, its first close under 11,000 since November.

In a bit of irony following the S&P downgrade, investors decided U.S. debt was one of the safest places to be. They also sought refuge in gold, which set a record price.

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European markets shed their early momentum and losses were heavy in Asia. Most stocks were trading sharply lower amid mounting fears over the opening of U.S. markets, when traders will have their first chance to respond to Standard & Poor's momentous decision to lower its triple A rating for the U.S.

"The reverberations from S&P's downgrade are still being felt across the globe," said David Jones, chief market strategist at IG Index.

For a brief while Monday, it seemed that the risky decision by the European Central Bank to buy the bonds of Italy and Spain in order to help them pay their way had helped ease the selling pressure, at least in Europe, but that soon changed.

Monday's trading came after one of the worst market weeks since the collapse of U.S. investment bank Lehman Brothers in 2008 -- around $2.5 trillion was wiped off global stocks last week.

In Europe, Britain's FTSE 100 index of leading British shares was down 1.7 percent at 5,157 while France's CAC-40 fell 1.6 percent to 3,227. Germany's DAX was 2.3 percent lower at 6,091.

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The natural question on everyone's mind is why? We've known the U.S. economy has been slowing for months, and no mind-blowing new shocker emerged in the economic data on Thursday.

From a left-wing Keynesian perspective, it is tempting to wonder whether the debt ceiling deal's likely contractionary impact on economic growth is finally sinking in, but even that explanation doesn't seem sufficient to account for a market plunge on this scale.

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The Dow Jones industrial average plunged more than 500 points Thursday. Investors are concerned that the U.S. economy will enter another recession and that Europe's debt problems are not closed to being solved.

Major stock indexes fell more than 4 percent.

The Dow is closing with a loss of 513 points, or 4.3 percent, to 11,384. It was the worst day for the Dow since October 22, 2008.

The S&P 500 is down 60, or 4.8 percent, to 1,200. The Nasdaq is down 137, or 5.1 percent, to 2,556.

Twenty stocks fell for every one that rose on the New York Stock Exchange. Volume was very heavy at 7.5 billion shares.

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The worst-case scenario? We're looking right at it. For very good reasons, the global investor community has concluded that the United States is either unwilling or powerless (or both) to take any aggressive steps to counteract a growing economic slump. Remember the fearsome  bond vigilantes? Right now they are gibbering in fear in the basement, stocking up on bottled water.

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From The Washington Post:

Investors were paying more Wednesday to insure against a loss on U.S. debt than they were to hedge against a default by Turkey, Thailand, the Philippines or the Slovak Republic. The cost was about four times the price for British debt, almost twice the price for Russian debt, and more than double the price for IOUs issued by Panama.

Credit swap gamblers are speculating that the the greatest superpower and biggest economy is more likely to default on its debt than the Philippines. That's impressive.

The surreal nature of the debt ceiling crisis gets more stark by the day, if not the hour. As we hurtle closer and closer to the deadline, no one knows exactly what will happen, but everybody knows something really bad could happen. This is entirely unlike most previous economic crises -- either those that brewed slowly, like oil-shock induced recessions, or those that came fast -- like the post-Lehman Brothers collapse. It's hard to think of anything historically similar: a crisis that is entirely in our power to avoid, but might happen anyway, due to phenomenal political dysfunction. If there's any good news, it's that wiser heads have some time to prepare, but that's small solace.

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Next, start the blame game.

On the Laura Ingraham radio show Wednesday, House Speaker John Boehner acknowledged that "a lot" of Republican House members "believe that if we get past August the second and we have enough chaos, we could force the Senate and the White House to accept a balanced budget amendment."

Boehner then said that he disagreed with that theory. In his view, "the closer we get to August the second, frankly, the less leverage we have vis a vis our colleagues in the Senate and the White House." But the damage was done. As the news of his comments spread through social networks, the Dow Jones Industrial Average began to fall sharply. It closed down 198 points.

OK, we don't know for sure that traders finally got spooked at this latest proof that  that House conservatives are actively looking forward to debtpocalypse. The steady drumbeat of negative economic data could just as easily be taking its overdue toll? Or maybe it's all the Democrats' fault. Reliable right-wing propagandist Larry Kudlow argued that Harry Reid's attack on the Boehner plan was the real culprit. Nyah nyah nyah.

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Baker shows that the bulk of the predicted shortfalls auguring long-term trouble for government worker pension funds can be attributed to the sharp drop in the stock market between 2007 and 2009. Assuming decent economic growth, future liabilities, as measured against projected future GDP, are, in Baker's view "manageable."

The likelihood that Baker's paper will change any minds is poor. The fight over public sector unions doesn't come down to the question of how to balance state financial ledgers -- instead, it's all about political power. Unions support Democrats; therefore Republicans seek to crush unions. Republicans are especially aggrieved by public sector unions, which they believe unfairly use taxpayer funds to pursue agendas that conflict with the conservative mandate.

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To faciliate sales of 1.2 billion euros worth of four and ten year bonds, Lisbon offered a yield of 6.71 percent. That's a tiny bit under the 6.80 rate reached at the last Portuguese offering in 2010. But it's still awfully close to the 7 percent level which seems to be considered the current point beyond-which-there-is-no-return except for a Eurozone bailout. (For comparison purposes, the U.S. Treasury is currently offering ten year bonds at yields of 3.35 percent.)

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This is a big deal for a few reasons.

First of all, Facebook is now a $50 billion company. (If you're trying to wrap your recession-blown mind around that much money, try to imagine about 11 million pounds of cash in dollar bills. Or maybe that's not so helpful ...) While some pundits think this sounds expensive, others are hardly shocked. The Atlantic's Nicholas Jackson points out that Facebook is now worth twice as much as Starbucks and with Goldman's support might follow the same path as Ralph Lauren, which increased in value 16-fold after the Wall Street behemoth invested.

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The left is split between those who believe the Fed's numbers are too small to do any good and those who believe, with good reason, that the beneficiaries will primarily be Wall Street instead of Main Street. Conservative critics tend to fear the inflationary or bubble-inducing prospects of magical money creation.

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