Scenes from an economic meltdown

The incredible shrinking Japan; Eastern Europe as the new subprime; California can't pay the bills -- is it any wonder that investors are having another panic attack?

By Andrew Leonard

Published February 17, 2009 5:15PM (EST)

After a three-day weekend, investors came back to work Tuesday morning and panicked. All the major stock market averages dropped like rocks immediately after the opening bell, nearing their lows from last November. For the rest of the morning, stock prices stabilized, but the nervousness was palpable.

And why not? Economic news from across the globe is astoundingly bad. Japan's economy is shrinking at a shocking annual rate of 12.7 percent. Big bank exposure to Eastern European government debt is now being labeled the Eurozone's subprime meltdown and has sent the value of the euro plummeting. The state of California, by itself one of the world's top 10 largest economies, teeters on the brink of its own very special brand of bankruptcy.

And while Republican politicians who presided over the expansion of massive government deficits grandstand absurdly about "generational theft," investors, report both the Wall Street Journal and the Financial Times, are worried, on the one hand, that the stimulus plan isn't big enough to make a real difference in the U.S. economy, and on the other, that the sums required to stabilize the banking system -- whether by bailout, government-managed bankruptcy, or outright nationalization -- will reach into the multiple trillions of dollars.

Really, the most surprising thing is that by high noon in New York on Tuesday, the Dow Jones Industrial Average was down only 262 points.

Andrew Leonard

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

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Bank Reform Globalization How The World Works U.s. Economy Wall Street