– The Washington Post reported on Saturday that a surge in government spending “could send the federal deficit soaring toward $1 trillion this year, creating the deepest well of red ink since the end of World War II.”

– 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…