That whole stick-man thing explains phase 1 of the problem.
We've now moved into phase 2.
Right now, none of the banks know how much bad debt the other banks are holding (most of them probably don't know how much bad debt they themselves are holding, because it has been so well hidden).
Because of this lack of trust, the banks are unwilling to lend money to one another. A banks primary business is lending money and they are not doing that anymore. Without debt, economies can't function properly, they freeze-up. Hence the term credit-freeze.
So where do they get some 'clean' money to lend to one another? Unfortunatly for us, they withdraw it from 'emerging' markets like ours. In short, America phoned and they want their money back.
This is bad news for us in the short term, but very bad news for America in the long term. Their growth has been financed by debt that they exported to the rest of the world. It turns out their debt was as 'safe' as Chinese milk products. Now they've had to recall it all, borrow even more money to replace it with 'untainted' debt and (the worst part of all), no-one has any trust in their debt anymore.
If no-one trusts yours debt anymore, you have a difficult job convincing people to buy it. If no-one buys it they can't finance their growth. They're in the poop up to nose level and they can' tread water any more.
