We’re melting!

Any notion that the big bailout bill would bring confidence to the markets and stabilize the financial meltdown in the U.S. disappeared today in early trading on Wall Street. The market is down about 5.6% (at 9:51 a.m. CT), dropping to a five-year low.

I’ll be posting updates and links here during the day.

9:57 a.m. Zachary Karabell, says the U.S. is losing its status as the center of the global economic system. “I doubt it’s a secret anymore,” he says. He writes in the Wall St. Journal…

What is happening to finance today is similar to what happened to manufacturing beginning in the 1970s. Until then, U.S. manufacturing accounted for as much as half of all global output. By the 1970s, Germany and Japan began to exert themselves as manufacturing titans. So did Taiwan, Singapore, Korea and others that had benefited from American aid. The globalization of manufacturing continued, and was accelerated by the information technology revolution of the 1990s. While the U.S. today continues to produce a decent share of global manufactured goods, it is one among many and employs only 13 million people (10% of the workforce) in a sector that in the middle of the 20th century accounted for a third of all jobs. The same thing is now happening with finance.

He says there’s been a massive shift of wealth to Asia. Is this the sun setting on the “U.S. Century?” (Please comment below)

10:07 a.m. – CNBC analyst points out that the government now has powers under the bailout bill it hasn’t used yet. “They’re still reading the thing,” he says. Will the bailout work? The Economist tackles the question.

The pain is reaching municipalities and states. Alabama’s Jefferson County is on the verge of bankruptcy. California’s governor, Arnold Schwarzenegger, has reportedly given warning, in a letter to the Treasury, that his state is running out of cash to fund day-to-day operations and may need an emergency loan of $7 billion from the federal government.

Do you get the feeling that next month’s Minnesota financial projection is going to be a disaster?

10:09 a.m. — It seemed like only yesterday we were worried about inflation (Wait! It was yesterday). Now, we’re hearing that the threat of deflation is returning. Ten years ago — 10 years! — MPR tackled what happens with deflation and why it’s not necessarily a great thing. Here’s a trip down memory lane. Or a glimpse into the future. Or both.

10:11 a.m. – Bloomberg reports that the legal wrangling between Wells Fargo and Citi may end with Wachovia being split between the two. Those are banks. You know, where we used to keep our money.

10:26 a.m. What are the darkest days in the history of the stock market? Here’s a historical look:

10:51 a.m. – The Dow is down 4.69% with a loss of 483. That puts it in 8th place and knocks (at least for now) 2/27/2007 off the top 10. Three of the top ten losing days have come in the last month.

11:01 a.m. – The head of Lehman Brothers dropped what once would be considered a bombshell on Congress today, saying federal regulators knew exactly what the situation with the onetime financial giant was. “Once would be considered ?” How much confidence do you have in the government these days? Is this sort of revelation really much of a surprise?

11:39 a.m. – How bad are things? CNBC went to a 10-person box to fit all the talking heads in today. It’s the first time they’ve gone to the 10-person display. The previous record was 8, two weeks ago.

11:42 a.m. – Richard Fuld, CEO of Lehman Brothers is now testifying before Congress. There have been some protests in the room. Times change. Two years ago, protests broke out in hearings about a war. Now, they’re focused on the House Committee on Oversight and Reform for a banking hearing.

12:26 p.m. – Weep not for the Lehman execs. According to Henry Waxman, Lehman was steering millions to departing execs while asking for a bailout.

12:27 p.m. What’s an investor to do. Don’t “do nothing” is one piece of advice.

2:11 p.m. – Dow is down 611.58 or 5.97%. That bumps it up to third place in the all-time-points-lost list. I’ve just finished writing up a piece on the effect on nonprofit organizations and will post that shortly.

2:13 p.m. – According to Floyd Norris at the New York Times, the market has lost 13% over the last three sessions. The crash of 1987 was the only other time that has happened since World War II. Prior to that, the last time it happened was 1940, when France was conquered by Germany.

2:15 p.m. — Using the word “depression” in terms of the economy was, until recently, the stuff hyperbole was made of. Not anymore. CNN is out with a poll that says 60 percent of those surveyed say a depression is “likely.”

2:21 p.m. – Sun Country files for bankruptcy. The economy had something to do with it. The arrest of Tom Petters had a lot to do with it.

3:22 p.m. – The market willed itself off its lows of 800 points. Closes down 369.88.