Yes, it's cascading around the world, with turmoil in the international markets today. I think we're headed for a global recession -- all the pieces are so closely interconnected these days that it's pretty hard for the U.S. to sneeze this badly without getting it all over others.

Of course it is. It just started with bad mortgages, just as the stuff that led into the great depression were associated with illiquidity. People can't pay their mortgages, not enough people are buying foreclosures, and the impact lands on the lenders (whether they're the lenders themselves or whoever bought the mortgages or derivatives of them in the secondary market). Since whoever loaned the money to the home buyer probably borrowed it, the damage runs upstream, lenders lose money and therefore have less to lend, and (sorry if this next bit is hypertechnical) all hell breaks loose. Eventually you get to the point where credit is so tight that ordinary borrowers can't get the short-term loans they usually need, and all of a sudden you've got people not able to pay their employees or to buy office supplies for their employees to take home with them. Employees have no money or get laid off, the people who sell the office supplies for the laid-off employees can't sell it, so THEY lose out, your general contractor can't get financing for a backhoe (as if anybody had credit enough to pay for him/her to dig a hole with it) and Caterpillar loses the sale, etc., etc. The moral of the story probably isn't just "pay cash" either. Restrictions on cash implicit in the gold standard were what got us in the mess we were in in the 1920's. Ok, I'm gonna go cut my wrists now. Thanks for asking.