So, I blogged awhile ago that we were entering just the eye of the storm and we’d have another hard rocky time ahead of us. That rocky time begins now. The initial part of the recession was due to the bubbles bursting, financial and housing. Those bubbles kicked in and are starting to drag down the rest of the economy now. As victims of the above bubbles, everyone has tightened how they spend money (and actually save it instead – can you imagine?!). Not only retailers but especially lenders and creditors. No one is spending money any more, or is able to get money in the first place. As more and more jobs are lost as a result of Part 1, this will go even further and drag us down quite a bit to the full extent of this recession (potentially even depression [classified as a -10% change in GDP]).

While the market realized this was going on, it never really quite sinks in until official data comes out (albeit too late). Today, and even last week with its unemployment numbers, are the signals of Part 2 of this recession. Let’s see how far it drops. During then, keep safe.

NBER: Determination of the December 2007 Peak in Economic Activity

This also begins to explain why foreclosures starting happening en masse at the beginning of last year and it bringing the recession out in force.

S&P 500 Crashes - from Calculated Risk

I’m of the belief that the current blipping is the eye of the storm and we have more room to fall as the recession beats us down over the next year. I love graphs.