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smithy said:
Yup. There's probably a lot to that, but it's not the only thing. I think that article also alluded to the fact that the Fed had plunged their lending rates while the Euro zone kept rates up to fight inflation, so there is a certain amount of dependancy on the Fed's panic rate cut in the face of the US slow down. Furthermore, the US finance industry managed to export a lot of the bad mortgage risk and so the credit crunch is a global phenom. The big problem is that money is dissappearing and new money is not being created to cover needs. That kills a lot of business. If you need to buy materials, process them and then sell them you can put out savings to buy, use savings to produce and get paid a couple of months down the road all while having to come up with more savings to repeat teh cycle before the pay comes in or the system runs on credit with short term borrowing rolling over month by month. If this credit dries up (which it is doing) then even though the industrial capacity is there to continue, the markers for keeping score with all the players have been taken from the board so the game can't go on.