How This Might Play Out
When was the last time we saw everything selling off at the same time like this? 2008.
Instead of actual bank losses and other real things driving this liquidity-destroying event, it was mere words from the Fed that it just might not (emphasis on might) print money to feed to the markets forever.
We all knew that the free money couldn't last forever, but the markets reacted horribly the idea being spoken out loud by Bernanke nonetheless. All this tells us is that the markets were riding on hot-air money and were principally a liquidity-driven phenomenon that could only be 'saved' by the resumption of very high economic growth to (eventually) justify the extraordinarily high prices for equities and bonds.
This leaves the Fed, and other central banks, with just two choices. Print more, or let this thing fall apart…