Who is steering this ship anyway?

While stock markets continue to feed off of one another in a seemingly never ending downward spiral that saw the Dow well below the 9,000 mark last week, people all over the world are busy holding their collective breath hoping this week might possibly be better.

And it might. Or better put, it better or we will all be suffering in a world of hurt.

With the stock price of many US companies like GM and Ford sitting at close to zero, it's hard to conceive that they could fall any further, but again, anything seems possible especially in this environment.

On Saturday, there were revelations that GM would possibly merge with Chrysler, but on Sunday there was the news that GM had already been in talks to merge with Ford beforehand. Then in an unusual move, both talks were suspended until the economy improves making it easier for a merger to take place.

However, even the head of the IMF has said not to expect any sort of recovery until late next year. I would say that even that estimate is optimistic.

GM, having already lost 70 billion dollars since 2004, is also looking for a bailout package, but the industry may only get around 50 billion or so if they're lucky. So it seems possible that the big three will quickly become a single entity, or face total bankruptcy if action isn't taken soon. Should a merger take place between GM, Ford and/or Chrysler expect massive layoffs and several US plant closures as they search for elusive profits and scale back similar product lines.

Individual states like Wisconsin will offer "too good to pass up" incentive packages in order to keep these plants form closing, but market conditions and basic viability will dictate their choices in this chaotic market.

Of course any talk of merger during this period of economic instability will result in massive layoffs, even more than usual as companies are looking to simply survive the crisis not prosper.

Currently the US has an estimated six percent unemployment rate, but we can expect this number to jump considerably in the months ahead. Already there are reports of massive budget shortfalls in several states like California, Illinois, Florida, etc.

For example, the Illinois comptroller recently reported a shortfall of over a billion dollars and stated they haven't been able to pay many of their bills. As these bills continue to pile up, several non-profit organizations and other contractors are on the brink of collapse. Many are attempting to hold out as long as possible, but most will not remain open by Christmas unless the state can find the money it desperately needs.

Like the auto industry, states are also facing a perfect storm of sorts.

With the credit markets all but dried up, there is no money to borrow to pay for what it owes. As more and more people find themselves out of work the tax base continues to shrink leaving less revenue to collect. So increasingly states will have to mimic corporate America and reduce their budgets further, or face the looming issue of bankruptcy.

As the downward spiral continues with the weakest falling first, we can expect property taxes (at least) to rise, services to be eliminated and projects to be shelved as the crisis begins to effect everyone.

Adding to the problem are millions of baby boomers who are seeing their retirement savings dry up almost completely leaving the majority of them with little option but to continue working for several more years. Many won't be able to keep their jobs, some will, but either way they will directly compete with the rest of us for the few remaining jobs left.

Luckily many of them already have homes that are bought and paid for, but this may be their only real investment left and it's certainly not a good time to sell.

Re-energizing the credit markets would go a long way toward helping the problem, but by most estimates the bubble is only half over. There are still massive problems lurking in the books of several companies in the US and around the world, so even if the government intervenes nothing will change until virtually all the bad debit is accounted for.

Some of these obligations will come due over the next two weeks and already there is talk of more companies, insurance providers and banks on the verge of collapse.

Both GM and Ford are already highly leveraged by well over a trillion dollars through credit default swaps as are issuers Hartford, MetLife, and Prudential on the insurance side.

As these issues continue to surface in the days, weeks and months ahead it will only fuel an increased sense of panic, especially on Wall Street.

Unfortunately while Main Street holds it collective breath, world politicians and the economies they represent are increasingly playing the blame game while on the surface appear to be cohesively working together.

It's becoming obvious that during the remainder of this lame-duck presidency, there will be little done to calm investors, sooth the nerves of companies and states facing bankruptcy, or placate other increasingly angry nations as we drive into uncharted territory.

As the election draws near one thing is for sure, the problems of Iraq, Iran, Afghanistan, energy, global warming and the economy started or ignored by this administration will need to be corrected by someone else.

And we've been told time and time again that our economy is simply too big to collapse, but like the largest cruise liner of it's time, all it takes is a lack of observation (or regulation) and a half-hidden iceberg to sink something of truly Titanic proportions. Leaving us all to ask, who is steering this ship anyway?