Away from Wall Street and Bay Street, the economic engines that power the North American economy are sputtering for lack of fuel and lubricant.
The failure of U.S. politicians to secure a financial rescue yesterday and the stock-market collapse that ensued now threaten to make life in the real North American economy even worse.
For the banks, the cost of short-term cash - the foundation of their consumer and business lending - was already at record levels. Now uncertainty about whether the $700-billion (U.S.) plan can be saved is likely to make credit markets even tighter, with negative implications for companies in Canada as well and the prospect of a broader retrenchment in consumer spending.
As U.S. banks tighten lending, an ongoing massive loss of wealth from the meltdown in stocks risks shattering the fragile confidence of the world's most powerful consumers. They had already been curtailing spending amid the worst financial crisis since the Great Depression, and yesterday's tumble alone erased more than $1-trillion in American investor savings.
And while the centre of the storm remains on Wall Street, Canadian companies are already feeling the effects.
"There is no money available for even good companies," said Kacee Vasudeva, chairman and chief executive officer of closely held Maxtech Manufacturing Inc., a maker of automobile parts in Waterloo, Ont. "If this bailout fails, there will be a bloodbath."
Most economists say the U.S. economy was already on its way to recession before the historic plunge in the Dow Jones Industrial Average led it to shed 777.7 points, or 6.9 per cent. The drop was 840.9 points for Toronto's benchmark index, also a 6.9-per-cent loss.
"My personal concern is that people are going to act so conservatively that it becomes a self-fulfilling prophecy," said Jack McDonald, who runs Leeza Distribution, a Montreal-based company that stockpiles and delivers countertops. "We're certainly rationalizing our inventory."
Lenders aren't likely to do anything to encourage Americans to return to the box stores or buy a home any time soon.
Banks around the world are hoarding cash out of fear of lending to the next financial institution to be brought down by exposure to toxic assets linked to subprime mortgages.
The bailout plan conceived by U.S. Treasury Secretary Henry Paulson was intended to restore confidence in markets by using taxpayers' money to remove bad debt from the balance sheets of financial institutions.
There is a real risk the uncertainty will cause more banks to fail, making credit even harder to come by.
"I am dead scared," said David Laidler, a professor emeritus of economics at the University of Western Ontario and a former adviser at the Bank of Canada. "My guess is the financial system is really going to start coming apart in a big way and it's going to happen quickly."
Maxtech's Mr. Vasudeva said credit has been unavailable for auto-parts makers for six to eight months. The company has developed new joints for automotive exhaust systems that could save auto makers as much as $15-million a year - except Mr. Vasudeva can't get anyone to lend him the money to develop the idea.
"If you can't develop the innovation and take it to the marketplace, you will die a natural death," he said.
Less than a year ago, Canada's mining industry was basking in what was being called the greatest resource boom in half a century. Now, the financial chaos has investors fleeing the once red-hot sector.
"There is no access to capital right now, zero," said Ian Delaney, a stock-market veteran and the chairman of Toronto-based resource producer Sherritt International Corp., which has coal-mining operations in Western Canada and oil assets in Cuba.
Mr. Delaney said he had "never seen it like this, as consistently and as dangerously, in my life." Sherritt has sought to "avoid economic calamity" by keeping debt off its balance sheet and streamlining operations, Mr. Delaney said.
In Saskatoon, Jerry Grandey, the chief executive officer of Cameco Corp., the world's largest uranium producer, said the financial crisis has prompted the notoriously prudent company to reassess its capital expenditures.
As grim as things are, Canada likely will avoid a recession, said George Vasic, chief economist at UBS Securities in Toronto. While the U.S. economy will contract over the second half of the year, Canada's gross domestic product likely will shrink in only one of the final two quarters of the year, Mr. Vasic is forecasting.
For Leeza's Mr. McDonald, this may be a challenging time in terms of consumer demand but he's looking at expansion and riding through it.
Most of the company's sales are in Canada, where the housing market has mostly held up, supporting demand for the countertops it distributes. Leeza has just secured fresh credit at reasonable terms and is thinking about preying on some of its distressed competitors in the U.S. northeast.
"There might be some companies to pick off," Mr. McDonald said. "If you can pick up some infrastructure down there, you do it."
THE FINANCIAL CRISIS: CANADIANS WEIGH IN
"I'm sure the [teachers' pension]fund is hit, but I don't think it will affect me. I guess I just have a lot of optimistic faith that things will bounce back. In the meantime, I'm not going hungry."
Rick Schultz, 58, a retired Toronto teacher
"I either let that eat up my retirement, or keep working."
Tom Fontaine, a 66-year-old American now working in Toronto, who says North American losses affect everyone
"We are down to almost nothing. We are now in cash. It's a little confusing with what the Americans are doing right now. It's hard to know what's going to happen next."
Shannon Strate, 26-year-old accountant from Edmonton, and her boyfriend pulled most of their money out of the stock market
"I'm a little bit wary, but not to the point of panic. I'm going to keep an eye on it."
Rachel Wickens, an employment counsellor in St. John's, Nfld.
"I've lost my portfolio, so that's a disaster zone. I'm cutting wood to cook with. It means ... that retiring's impossible in four years."
John Young, business trainer in Vancouver, 61
"I took the plunge, and it's pretty depressing. ... I think I'm down about 15 per cent and that's not even factoring in [yesterday's]losses."
Richard Murray, a 34-year-old recruiter in Toronto, was afraid to look at his investment statements