Good analysis, to which I would add: peak debt. There is only so much debt a person can take on, and for now at least, that amount has been exceeded. Much of t

Good analysis, to which I would add: peak debt. There is only so much debt a person can take on, and for now at least, that amount has been exceeded. Much of the financial innovation of the last few decades has been about pricing risk so efficiently that larger and larger amounts of leverage can be employed without the borrower going under. This was the ultimate driver for higher asset prices (in particular homes), which in turn via mortgage equity withdrawal and other means have funded a lot of the second houses, extra cars, big screen televisions, and other luxuries we see around us today. The credit crunch will soon extend to credit cards and auto loans, and we'll see disposable income fall further. Share prices will fall as earnings disappoint and most investors, seeing no dividends and unlikely capital gains through the recessionary period, will abandon ship. I don't think this is all priced in yet.