The Economy: How Bad Can It Get?

A full year into the miserable journey of the credit crisis, the economy and financial markets have come to a crossroads, beyond which lay several possible destinations, not all of them pleasant.

So far, despite bank losses of some $400 billion, a crumbling housing market and oil prices at $130 a barrel, the economy has managed to avoid a deep recession — at least according to the common definition, which is two quarters of negative gross domestic product growth.

But federal tax-rebate checks have supported consumer spending, which drives 70% of the U.S. economy. That jolt will soon fade, potentially leading to a hangover.

Wall Street Journal