The old school would predict recessions or depressions on the economy as a whole, but what we have experienced over the last few decades is what one economist called “rolling recessions.” Recessions may be experienced by industries and regions; some areas could be economically healthy and others could be in the pits.

Clearly housing and the housing related industries are in a free fall. The housing industry is in a recession that could well become a depression. Many entrepreneurs collateralize their houses to fund their business, and the lower home prices reduce their borrowing capacity and could easily cause a liquidity crisis for many small businesses, compounded by higher fuel and raw material prices.

Bank stocks have been clobbered in the market. Citicorp is cutting dividends and laying off thousands.

The areas with the biggest recent gain will feel the most pain. Areas with expensive vacation homes are getting hit the worst. Areas of Florida and the Gulf Coast are being especially hard hit.

Employment is weakening but still strong and most mortgages are performing. It is healthy to see banks writing down their loan and collateral losses agressively to get through this pain as quickly as possible. If you have to eat a frog, you don’t want to do it in small bites.