The more than $4 trillion that governments have thrown at the financial crisis pales in comparison with the wealth destroyed in falling stock markets, and conditions may get worse as economic reality sets in.
While there are some encouraging signs that efforts to revive credit markets are beginning to gain traction and lending is slowly resuming, companies are sounding the alarm over the damage already done to their profits.
Japan's Sony, for instance, is finding fewer buyers for its cameras and televisions. French carmaker PSA Peugeot Citroen is planning "massive" production cuts as demand fades. Online retailer Amazon.com is warning that holiday sales won't be as strong as expected. "We are now in the midst of a full-blown global financial crisis," said Citigroup analyst Robert Buckland. "Policy-makers have been unable to calm the storm, although the increasingly aggressive response offers some hope. The earnings downturn looks to have much further to go."
In the five weeks since investment bank Lehman Brothers collapsed, stock markets have fallen so sharply that they have wiped out $12 trillion in wealth, according to Citigroup.
Consumer and business confidence has also nose-dived since then, and spending has fallen sharply. That will no doubt weigh heavily in the US Federal Reserve's decision on Wednesday on whether to cut short-term borrowing costs.
Investors widely expect another half-point reduction, which would take the benchmark federal funds rate to 1 per cent. When the credit crisis first spiked in August 2007, the rate stood at 5.25 percent.
JPMorgan economist Bruce Kasman thinks things may get much worse. He is predicting that GDP will decline at a 4 per cent clip in the fourth quarter, which would be the worst since 1982.
The gloom is global. Consider US-based poultry producer Sanderson Farms. Its best customer for chicken legs is Russia, but sales are falling because Russia is getting a lower price for its oil and its access to credit is drying up.
That could translate into weaker profits at Sanderson, which would exacerbate the US economic slowdown and in turn drive oil prices lower and weaken exporters like Russia!
Talk about vicious cycles.
"For the past few decades, US consumers have driven global growth, but they are tapped out and likely to stay in balance sheet repair mode," said Benjamin Reitzes, an economist with BMO Capital Markets. "The story is similar in the UK and Europe. The next cycle of growth must come from emerging markets, as many have vast pools of untapped consumers."
Until that next cycle starts, though, corporate profits may hold quite a few more unpleasant shocks for the stock markets.