Global markets went berserk on Monday in one of the worst trading days in recent memory as fears of a slowdown in the U.S. economy helped drive declines in stock markets in Asia, Europe, and the United States. Money, meanwhile, flocked into safe havens such as U.S. and German government bonds, a sign of the panic gripping investors looking to avoid the financial fallout from a sudden unraveling of a summertime market that just got unseasonably chilly.

Japan’s Nikkei blue-chip index gave up—literally—after losing more than 12 percent after an already black Friday, with emergency circuit breakers meant to stop panic selling kicking in and halting trading multiple times; South Korea’s market fell almost 9 percent, the worst since the Great Recession. Markets in Europe fell by 2 percent to 3 percent, and early action on the Dow Jones and Nasdaq stock exchanges hinted at a dark Monday.

“Markets are like a toddler, and you’re always one tantrum away. Things are always black or white; they are never gray,” said Robin Brooks, a senior fellow in global economy and development at the Brookings Institution.

The bloodbath, though irrational, is problematic for a lot of reasons, not least because it is wiping out billions if not trillions of dollars of paper wealth—a sudden and virtual impoverishment that could soon trickle into real things such as consumer sentiment, manufacturing confidence, housing starts, and job creation, the nuts-and-bolts parts of national and global economic prosperity.

What’s even worse is that the financial frenzy is taking place at a time of intense geopolitical uncertainty, with two big shooting wars in Europe and the Middle East, mounting chaos in South Asia, flying bricks in Britain, a divided Europe, and an increasingly irredentist China spooking all of its neighbors. More important still, a pivotal U.S. presidential election is barely three months away.

So what just happened? The first shoe to drop was the gloomier-than-expected job numbers out of the United States last week, which hinted at the possibility of the long-awaited economic slowdown after years of outsized growth. The U.S. Federal Reserve, the world’s most important central bank, has been slow to get off the couch, even maintaining fairly high interest rates last week. Now it is under pressure to scramble to cut rates quickly and in fairly big bites to get back ahead of a storm that hasn’t even got proper dark clouds yet.

But a disappointing employment report wasn’t the only grim news: The Fed’s July Beige Book, an informal snapshot of the U.S. economy region by region, hinted at some potential weak spots such as consumer loans or new car sales, in what has been and in many ways still is a gangbusters economy.

There were other bad tidings from the United States as well, including a cold shower for the overheated technology sector, with dismal earnings numbers from giants such as Intel and a big-money flight away from Apple. The result has been a sell-off of stocks, especially in the tech sector, that were trading at historically high valuations and which were long overdue for a correction.

“The market bullishness over the past year had been driven by a belief that the Fed had the soft landing in hand and that artificial intelligence investments would soon start showing returns,” said Benn Steil, a global economics expert at the Council on Foreign Relations. “Now the market fears that the Fed may be way behind in cutting rates and that AI revenues may fall well short of expectations.”

The shiv, though, came from Japan, which last week unexpectedly raised interest rates from practically zero to 0.25 percent to stay ahead of the first inflation Japan has had to deal with for years. It was a small rate hike, but for investors all over the world accustomed to essentially free money from Japan, coupled with a dirt-cheap currency, the move spelled trouble. Higher rates, alongside a soaring yen, make it a losing proposition to continue borrowing cheap money in Japan to plow cash into juicier assets elsewhere. So investors are now selling the family silver everywhere to cover their yen shortfalls, turning stock markets around the world from bullish to bearish.

Where that money is going is into traditional safe havens such as U.S. and German 10-year bonds. Yields on U.S. Treasuries have fallen about one-half a percentage point since late July, while yields on German bonds are falling like Croatian gymnasts. Falling yields on the gold-standard life-vest investments in the global marketplace are almost always a sign that big money is seeking shelter in a hurry.

The market carnage has some superficial similarities to 2008, inasmuch as it could help determine the final stretch of a highly contested U.S. election. U.S. President Joe Biden has presided over strong growth, low unemployment, and a soaring stock market, but he has been dogged throughout by inflation.

A big market correction, driven in part by fears that the U.S. economy is finally running out of steam, is not great news for Democrats hoping to rally voters to a new and relatively unblooded candidate. That’s doubly true when Republican nominee Donald Trump is making hay out of grim economic data and especially a market correction, which could be enough to re-inflate his sagging campaign, said Gary Hufbauer, an economic and trade expert at the Peterson Institute for International Economics.

“A crashing market could nudge him up in swing states, which, given his unsettling trade and economic policies, would be bad news for the market and the economy in the long run,” he said.

But U.S. inflation is not a big problem right now, and last week’s job numbers were not that bad. It’s not time to break the emergency glass just yet, Brooks said.

“U.S. and Fed policymakers need to come out and say, ‘Hold your horses.’ The payroll picture was not terrible, and the inflation picture looks benign. There is no sign that recession is remotely around the corner,” he said.

Market panic aside, there are other big differences with 2008-09. The Great Recession was so toxic because the global plunge into subprime mortgage debt and all of its derivatives left banks, insurance companies, and even European regional savings banks holding the bag on insanely large losses, with systemic ripple effects through credit flows, re-insurance, and the like guaranteed to make the crisis even worse. This time is still ugly, but it is different, and less threatening.

Still, sentiment matters, and falling markets beget a crisis of confidence. At a time when Western economic models, let alone Western democratic templates, are under fire and under stress, a global crisis of confidence is a very unwelcome addition to an already powder-kegged geopolitical situation.