Assessing the likely consequences of a correction is more daunting than merely predicting its inevitability. The array of lenders with wounds to lick is likely to be far broader than we might imagine, a result of how widely our increasingly efficient capital markets have spread these loans. No one should be surprised to find his wallet lightened, whether out of retirement savings, an investment pool or even the earnings on their insurance policy.

The bigger -- and harder -- question is whether the correction will trigger the economic equivalent of a multi-car crash, in which the initial losses incur large enough damages to sufficiently slow spending enough to bring on recession, much like what happened during the telecom meltdown a half-dozen years ago.

The thing with derivatives today is that nobody knows where the risk is now, on a macro basis. So we don't know who will be left holding the bag. Maybe it will be nicely spread around so that the financial world absorbs a lot of the pain itself (funds lose out, banks eat their reserves, investors see their portfolio lose value) and there is no need for a bailout. Or there will be more localised breakdowns in places of unexpected concentration of risk, which may threaten to spread and require public intervention. We just don't know.

In the long run, we're all dead. John Maynard Keynes