The Dow Jones industrial average fell more than 250 points Monday, joining a global sell-off triggered by news of America's first-ever credit rating downgrade.
Standard and Poor's lowered America's credit rating from AAA to AA+ on Friday. The unprecedented move has only added to already-growing fears the country may be headed back into a recession.
"The political gridlock in Washington leads us to conclude that policy makers don't have the ability to put the public finances of the U.S. on a sustainable footing," S&P Managing Director John Chambers said.
The S&P's lack of faith in America's leaders has markets around the world watching to see how Wall Street responds.
"I think it's a bit scary at the moment," one person said. "The whole world has got too much debt."
Markets in Japan, Hong Kong and South Korea all dropped sharply Monday on the news.
"I think the reaction in Asia has been much better than expected. I think it's rather muted," said Francis Lun, managing director at Lyncean Holdings Ltd., an investment holding company in Hong Kong.
China, America's biggest creditor, reacted to the downgrade saying the U.S. must "come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone."
Investors also reacted to the downgrade by flocking to gold, driving the price up to another record of more than $1,700 an ounce.
While the president waved-off questions about the downgrade upon his return to the White House, members of his administration blasted Standard and Poor's.
"I think S&P has shown really terrible judgment, and they've handled themselves very poorly," Treasury Secretary Timothy Geithner said. "They've showed a stunning lack of knowledge about basic U.S. fiscal budget math."
There had been talk about Geithner stepping down as Treasury Secretary, but with the debt crisis dragging on, he now says he'll remain at his post.
Meanwhile, Republicans are saying the loss of America's AAA rating is the result of the Obama administration's overspending.
Democrats, on the other hand, blame the Tea Party for holding up the debt talks.
"This is essentially a Tea Party downgrade," he charged. "The Tea Party brought us to the brink of a default."
As the finger-pointing continues, Standard and Poor's has warned the U.S. rating could drop another level if America doesn't make significant cuts on its debt in two years.