How Will The Financial Crisis Impact The Wider Economy

The basic problem is the fear that the credit markets will simply dry up. If no one will lend money (or it simply becomes ridiculously expensive to borrow money), then some very basic economic functions cease to work. This may start out at a high level with bank-to-bank loans and bank-to-business loans, but it can also filter down to things like your mortgage (if you thought things were bad before, wait until adjustable rate mortgages reset with even higher interest rates, contributing to this spiral), car loans and even credit card payments.