KEY POINTS:
If any doubt was left, events of the past two days have shunted the gravity of the US financial meltdown past that of the black Monday crash in October 1987.
Pundits are now making comparisons with the big collapse of 1929, which caused the Great Depression.
Even the optimists sound less than reassuring. Nobel economics laureate Joseph Stiglitz is considered one of the more positive.
Yesterday he said the current crisis "should" be less serious than 1929.
"The general view is that we have instruments, monetary and fiscal policy, that we know how to prevent another Great Depression," he said. Let's hope so.
The carnage on world markets was the worst since the days after the terrorist attacks of September 11, 2001.
But in relative terms, global markets - particularly our own NZX - held up better than in 1987.
This crisis is not only about how far markets fall. It is about a sickness at the heart of the US financial system. It is about credit, the life blood of the system. In the US, the blood has all but stopped flowing.
Three of Wall Street's top five independent investment banks have gone - victims, some might say, of their own reckless lending.
All three - Bear Stearns, Lehman Bros and Merrill Lynch - predated the crash of 1929.
They survived the Great Depression and the 1987 crash, but not 2008.
Thankfully, unlike 1987 and 1929, New Zealand is buffered from the worst of the American woes.
We aren't up to our neck in US debt. We're up to our neck in Australian and Asian investment. The damage to the Aussie banks has been slight, and Asian economies are still growing.
But the Wall Street meltdown still has an impact.
Nervousness in global banking will make it harder for local banks to cut interest rates. So it will be more difficult for the Reserve Bank to kick start our economy, which is already in recession.
Stock market falls will take their toll on savings as managed funds - including the many new KiwiSaver accounts - dip further into negative territory. From here, that looks the best-case scenario. The worst case? It's the great unknown.
But after Lehman Bros, we can certainly expect the downturn to last longer and bite deeper.
