NEW YORK (CNNMoney.com) -- Stocks tumbled Monday morning, as weakness in overseas markets and tumbling oil prices added to concerns about the length of the recession.

The Dow Jones industrial average (INDU) fell 70 points, or 0.9%, over an hour into the session. The S&P 500 (SPX) index lost 10 points, or 1.1%, and the Nasdaq (COMP) fell 26 points, or 1.4%.

Stocks slipped Thursday in the last session of a holiday-shortened trading week after a weaker-than-expected jobs report fueled worries about the economy. All financial markets were closed Friday for the Independence Day weekend.

Stocks rallied for three months, with the S&P 500 gaining 40%, on bets that the economy is closer to stabilizing. But stocks have drifted lower in the last three weeks on concerns that the run up was too much, too soon.

The US economy is lurching towards crisis with long-term interest rates on course to double, crippling the country's ability to pay its debts and potentially plunging it into another recession, according to a study by the US's own central bank

n a 2003 paper, Thomas Laubach, the US Federal Reserve's senior economist, calculated the impact on long-term interest rates of rising fiscal deficits and soaring national debt. Applying his assumptions to the recent spike in the US fiscal deficit and national debt, long-term interests rates will double from their current 3.5pc.

The impact would be devastating by making it punitively expensive to finance national borrowings and leading to what Tim Congdon, founder of Lombard Street Research, called a "debt explosion". Mr Laubach's study has implications for the UK, too, as public debt is soaring. A US crisis would have implications for the rest of the world, in any case.

[Torygraph Alert]

Nigeria's main militant group said on Monday it had sabotaged a Chevron oil facility and seized a chemical tanker and six crew members, the latest in a string of attacks in Africa's biggest energy producer.

The Movement for the Emancipation of the Niger Delta (MEND) said it attacked Chevron's Okan manifold late on Sunday in the southern Delta state, hours after it sabotaged an oil well head operated by Royal Dutch Shell.

It was not immediately possible to independently verify the statement. U.S. oil firm Chevron, which halted swamp operations in Delta state following attacks on its pipelines in May, said it was investigating the report.

Chevron, Shell and Italian energy firm Agip have cut output by around 273,000 barrels per day in the last six weeks following the latest campaign of militant violence....

MEND also said on Monday it seized a chemical tanker and six crew members off the coast of Escravos in the Niger Delta. It said three of the hostages were from Russia, two from the Philippines and one from India.

"Six crew members from the chemical tanker Siehem Peace was seized about 20 nautical miles from Escravos on Sunday ... and will be held until further notice," said MEND, who threatened further offshore attacks.

The worst of the recession may be yet to come and world leaders are in danger of hampering the recovery, Gordon Brown will say today.

As he begins a week of meetings with world leaders, the Prime Minister will strike an unexpectedly gloomy note about the prospects of an upturn and will demand that fellow heads of government "sound a second-wake up call for the world economy".

Soaring oil prices, rising 75 per cent this year, protectionist measures contributing to a 10 per cent drop in trade and the failure of banks to start lending again could all put the recovery at risk, according to Downing Street.

The remarks are a departure from Mr Brown's usual rhetoric. His forecast that the British economy will emerge from recession by the end of the year is expected to form the basis of Labour's general election campaign. Downing Street sources denied that the remarks were a change, saying that he had not spoken about the international economy for a while.

While Edward Harrison still believes that a technical recovery will occur Q4-Q1 he remains concerned about the downside risks, cites Brown's message today in France, (cited above), and faults the Obama Administration for spending their political capital bailing out big banks, for putting together a weak stimulus and for now having no bullets left.  He believes that, in order to keep deflation at bay, additional stimulus will be required.  Therein lies the rub.

The problem is the U.S. government budget deficit. In April, in a post called "The Cult of Zero Imbalances," Marshall Auerback made the case for stimulus, aware of the downside risks for the dollar and bond prices because of that deficit. Yes, there are risks for America associated with deficit-inducing stimulus in the short-term, but they can be mitigated if the Obama Administration actually showed a plan to reduce the longer-term deficit.  But, as David Leonhardt has argued, Obama's team has no deficit reduction plan whatsoever.

So now we must contemplate America's fiscal train wreck; and that is exactly what Richard Berner at Morgan Stanley is doing.  Here is an excerpt of his research note published today.

America's long-awaited fiscal train wreck is now underway.  Depending on policy actions taken now and over the next few years, federal deficits will likely average as much as 6% of GDP through 2019, contributing to a jump in debt held by the public to as high as 82% of GDP by then - a doubling over the next decade.  Worse, barring aggressive policy actions, deficits and debt will rise even more sharply thereafter as entitlement spending accelerates relative to GDP.  Keeping entitlement promises would require unsustainable borrowing, taxes or both, severely testing the credibility of our policies and hurting our long-term ability to finance investment and sustain growth.  And soaring debt will force up real interest rates, reducing capital and productivity and boosting debt service.  Not only will those factors steadily lower our standard of living, but they will imperil economic and financial stability.

Though doomsayers have been predicting disaster from deficits without those disasters materializing, Harrison begs to differ.

Well, they do matter.  Eventually, the day of reckoning will come.  Berner puts it this way.

Some are concerned that our reckless fiscal policy will trigger a downgrade of the US sovereign debt rating, making the financing of our burgeoning deficits more difficult.  While worries that the US will default on its debt are illogical, global investors and officials are concerned about the credibility and the sustainability of our fiscal policies.  So am I.  They fear that we will adopt policies that will undermine the dollar and the domestic value of dollar-denominated assets through a combination of risk premiums and inflation.  I worry about that too, although such policies probably would be accidental rather than deliberate.  As a result, interest rates may have to rise significantly to compensate investors, including reserve portfolio managers and sovereign wealth funds, for such dangers.  While the dollar will for now retain its reserve-currency status, such concerns put it at risk.