Today the Dow index dropped to 8579, its lowest level in five years. General Motors dropped 29% in a single day to its lowest level since 1950.
Then Wall Street Journal published this, the result of a survey of several economists:
http://finance.yahoo.com/banking-budgeting/article/105935/Economists-Expect-U.S.-Crisis-to-Deepen
"We're in the middle of a very dark tunnel," said Brian Fabbri of BNP Paribas, referring to the worsening credit crunch. "Each day we see another crack in the system."
Those cracks are quickly adding up. On average, the 52 economists surveyed now expect gross domestic product to contract in the third and fourth quarters of this year, as well as the first quarter of 2009.
This is the first time that survey forecasts for those periods have turned negative. If those predictions bear out, it would mark the first time U.S. GDP—the total value of goods and services produced—has contracted for three consecutive quarters in more than a half century. Economists put the odds of recession in the next 12 months at 89%, up from 60% in last month's survey.
It is a challenging scenario for the next president, as the election moves into the home stretch. Either Sen. John McCain or Sen. Barack Obama likely will face an economy in the midst of recession on Inauguration Day, even if the credit crisis begins to ease. The new administration will have to get up to speed quickly, taking over the largest government intervention since the Great Depression.
Among economists surveyed, 54% said they think the next president should launch an economic-stimulus package in January.
Economists were divided on where the stimulus should go. Some 13% said it should be used to increase food stamps and unemployment benefits; 9% preferred infrastructure spending; 4% favored taxpayer rebates and 28% said it should be some mix of those options.
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Tight credit markets have exacerbated the downturn. The unemployment rate stood at 6.1% in September, up from 5% as recently as April, amid job losses during every month of 2008. The economists expect an average of 74,000 job losses a month for the next 12 months with the unemployment rate reaching 6.8% by June, a level last seen in 1993.
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"For much of the year, policy makers warned about financial headwinds," said Lou Crandall of Wrightson ICAP. "If the credit mechanism deteriorates further, we'll hit a financial brick wall instead."
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