The Economist spells it out:
If the panic that has choked the arteries of credit across the globe is not calmed soon, the danger will increase that output in rich economies will not simply shrink, but collapse. The same could happen in many emerging markets, especially those that rely on foreign capital. No country or industry would be spared from the equivalent of a global financial heart attack.
The Economist’s recommendation? The world’s leaders need to get in sync, present a united front, and assure us that the cavalry’s coming:
The world’s finance ministers and central bankers, gathering in Washington, DC, this weekend for the annual meetings of the IMF and World Bank, should deliver a simple message: more will be done…That means more government intervention and co-operation in the short term than taxpayers, politicians or indeed free-market newspapers would normally like.
If you don’t find the Economist scary, you should listen to Nouriel Roubini, who stopped by Yahoo TechTicker yesterday. The last minute or two of the interview below lays out the full nightmare scenario. (Nouriel’s headed to Washington this weekend to harangue the IMF folks, so hopefully a coordinated, confidence-infusing strategy will emerge next week.)