One more post on Krugman, if I may, and then I'll move on. Check out the chart he reproduced on Saturday: it looks very much like it comes from the Economist, but I can't find the specific article. In any case, it shows the violent volatility in the credit markets, using the spread between Libor and Treasury yields as a proxy.

Tyler Cowen has a lot of questions:

Why markets are self-destructing in this way remains a puzzle; dump on markets all you want but why here and now?...
Is/was the subprime crisis simply a mask for a more general revaluation of the meaning and extent of liquidity? Are such revaluations always so bumpy and so lacking in locally stable iterative processes?