The dollar gained strongly in overnight markets on a heavy bout of risk-aversion after U.S. markets closed with a loss for the fourth straight week on Friday. Observers wryly noted that Mr. Obama now has the dubious honor of presiding over his very own bear market, with the S&P off over 20% since the day he took office on January 20.

After the majors opened with a gap to the upside, which likely was a hangover from the 2.33% gain made on the S&P in the last 30 minutes of Friday's trading, S&P futures turned negative after hitting a peak on 693 around 20:00 EDT and declined all the way to 670.75 (-3.21%) by 05:00 EDT.

Global equity markets followed suit. In Asia, the Nikkei fell 1.2% to the lowest level since Oct 1982, less than a fifth of its all-time high on 38915.87 made nearly two decades ago. The Shanghai Composite fell 3.4%, the Singapore Straits Times 2.3% and the Hang Seng Index 4.8% on HSBC, which represents 7.4% of the index.

In Europe, the FTSE 100 fell 1.63% by 07:00 EDT, led by banks. with the FTSE 350 Banks Index declining as much as 10% at one point on HSBC’s disclosure last week of massive losses at its U.S. consumer loan subsidiary and Lloyds capitulating to the U.K. government insurance scheme and resulting in a large (up to 75%) ownership stake.

Economic advisor and former Treasury Secretary Lawrence Summers told the Financial Times that the U.S. stance at G20 meeting next month will be to urge the industrialized world to boost demand with higher government

“The old global imbalances agenda was more demand in China, less demand in America, he said. Nobody thinks that is the right agenda now. There’s no place that should be reducing its contribution to global demand right now. It is really the universal demand agenda.”

The FT's comment was that “Mr. Summers made an unapologetic case for government intervention. This notion that the economy is self-stabilizing is usually right but it is wrong a few times a century, and this is one of those times. There’s a need for extraordinary public action now.”

Given the loss of 4.4 million U.S. jobs since the start of the recession (with 2.6 million of those coming in the last four months alone) we could see a structural social change underway. First up is a drop in consumer spending as we have already seen in autos and other durable goods which is spreading to non-durables. The US consumer may be greedy and materialistic, but he is not stupid. Bargain shopping was already a sport and it’s about to become Olympian.

Markets are just starting to acknowledge that this is not your father’s recession and that it may be your great-great-grandfather’s (referring to parallels with the Panic of 1873, beyond even the 1930’s). What we have here is Mr. Volker's failure of capitalism which may be so massive that it will require equally massive economic re-structuring that could result in volcanic social and political changes.