Global economy panic attack; Dow drops 500

Bailout or no bailout, the U.S. stock market can't escape the economic pain sweeping the rest of the world

Published October 6, 2008 2:17PM (EDT)

If the first 90 minutes of trading on the New York Stock Exchange Monday morning is any indication, then this week will indeed be, as econoblogger Felix Salmon predicted before the markets opened, another "long week." The Dow Jones Industrial Average dropped more than 500 points, continuing its late Friday slide.

Credit markets are tighter than ever. The TED spread hit another hit another record high Monday morning, signaling that banks are even less eager to lend to each other than than they were last week.

All this came after a relatively quiet weekend, financially speaking, in the United States -- no major banks failed, no Sunday evening announcements of massive new rescue plans or bailouts from the U.S. government. So what's the problem? Short answer: The rest of the world.

Russia's got a credit crisis. Iceland and Germany have joined Ireland in extending comprehensive deposit insurance to domestic banks. Italy's second largest bank is seeking to raise billions of dollars of additional capital. South Korean banks are struggling. India's stock market is plunging. Markets everywhere are in turmoil.

The global economy is having a panic attack.

Against this background, in the United States, the McCain campaign has decided it's high time to distract voters from financial matters by attacking Obama's "associations" with the likes of Bill Ayers and Jeremiah Wright.

Good luck on that.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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Globalization How The World Works Stock Market U.s. Economy Wall Street