– The auto industry could be about to trigger a “doomsday scenario” for the US economy, according to AP auto writer Tom Krisher. This happens when General Motors (NYSE:GM) buys out Chrysler LLC , guts its workforce, keeps Jeep and the minivans and “vaporizes” the rest of the company.

– The Financial Times says the US is heading for its worst recession since 1982.

Senior officials at the Treasury and Federal Reserve are confident that the rescue plan for US banks will succeed in preventing a financial system meltdown and ensure there will not be a repeat of the Great Depression. But they know that a sharp economic downturn is already baked in the cake. They do not, however, know how deep or protracted it will be.

– Doug Diamond and Anyl Kashap over at the Freakonomics blog are calling this the “most remarkable period of government intervention into the financial system since the Great Depression.” This is one of the most bearish indicators we can think of.

– “Now that the big five investment banks of America have been shut down,” reports The New York Times, “there is one big risk-taking banker left: the federal government.” It is taking a $250 billion bet on America’s banks by defacto nationalizing them. And there is no way of knowing for how much longer the government plans to stay the prime mover in the markets.

– Meanwhile, Bloomberg reports that “the cost of protecting European corporate bonds from default rose to a record amid investor concern bankruptcies will soar as Deutsche Bank AG analysts forecast the worst economic slump since the Great Depression.”

– This doesn’t seem to be worrying Mr. Market this morning. Traders are “optimistic,” says MarketWatch. “S&P 500 futures rose 28.4 points to 961.90 and Nasdaq 100 futures rose 41.25 points to 1,352.25. Dow industrial futures rose 224 points.” We wonder how long the bright mood will last.

– On Friday, the CBOE Volatility Index, or VIX, was up past 70. It’s the highest the index has been. Ever.

– According to Addison Wiggan and Ian Mathias at The 5 Min. Forecast:

While that does provide some look into the fear and uncertainty in the S&P 500, it’s really a testament to how wild the options market has become. The VIX is literally options traders’ anticipated movement of the S&P 500 over the next 30 days, annualized. So when the VIX hit 81, options are pricing an up or down annualized change of 81% over the next 30 days.

Simply put, it’s the Wild West in the options market. For that reason, we just finalized the best deal we’ve ever offered for our high-end options trading service, Options Hotline. Click here for the details.

– It’s wild. But Lynn Carpenter says the lessons from history show that doing nothing or selling everything are the worst things an investor can do in times like these. She says the brave — and ultimately the winners — will be putting new money in the market right now…

– The bill passed by the Senate includes provisions to increase the FDIC’s bank deposit insurance limits and a $150.5 billion package tax cuts.

– Despite the passing of the bill in the upper house, US stock futures slipped this morning. MarketWatch reports that “S&P 500 futures fell 9.9 points to 1,158.50 and Nasdaq 100 futures dropped 5.5 points to 1,573.25. Dow industrial futures dropped 71 points.”

– There are reports that the Fed is mulling another rate cut to further juice up the US economy with easy credit.

– The ECB, however, has held rates steady in the eurozone, despite a deteriorating economic climate.

– The chill wind blowing through the US has hit auto sales hard. “US auto sales dropped below 1 million last month for the first time in more than 15 years as some consumers struggled to get financing and others were frightened away from showrooms by bank failures and turmoil on Wall Street,” reports AP.

– Ford’s (NYSE:F) US sales “fell an unadjusted 34.6% in September to its weakest levels of the year due to a weakening US economy and tight credit conditions,” according to Reuters.

– The crisis is also pumping up junk bond yields as  Yields over benchmark rates on US junk-rated corporate bonds have widened to the highest on record, according to Merrill Lynch data.

With borrowing costs soaring, the market for junk bonds has all but shut. High-yield borrowers sold $845 million of bonds in September and $674 million in August, the slowest two-month period in at least a decade, Bloomberg data show. Issuance this year totals $59.8 billion, about half of last year’s tally.

–  Dig into into the US economy’s fundamentals doesn’t exactly inspire hope, either. Here are three data points from yesterday’s 5 Min. Forecast that are ominously bearish:

1) U.S. manufacturing activity plummeted in September. The Institute for Supply Management (ISM) says production sank to a score of 43.5 during the month. That’s the lowest level since 2001. A score of 50 is considered mildly healthy.

2) 8,000 jobs were lost in September. Most economic doctors expected 55,000 lost jobs, so this reading is perceived to be good. Overall, according to the employment consultants ADP, the economy has shed 80,000 jobs in 2008.

3) After taxes and inflation, real disposable income fell nearly 1% in August — the third monthly drop in a row. At the same time, the Commerce Department’s measure of inflation, personal consumption expenditures (CPE), rose to 2.6% — a 13-year high.