When inflation in the past 12 months has run at 5.4 percent, well over the twice the level with which central bankers are comfortable, the economy may not be fundamentally sound.

When foreclosures are running at record rates and housing prices fall by nearly 16 percent year over year, the economy may not be fundamentally sound.

When the two largest financial institutions in the nation, which guarantee about half of the mortgages, fail and have to be taken over by the government, when the fourth-largest investment bank files for Chapter 11, and when the Federal Reserve effectively nationalizes a massive insurance firm that is a component of the Dow Jones Industrial Average, the economy may not be fundamentally sound.

In an economy where consumption constitutes 70 percent of activity, retail sales falling two months in a row may indicate that the economy may not be fundamentally sound.

When industrial production decreases, the economy may not be fundamentally sound.

When the nation's three major automakers, some of the largest remaining manufacturing entities, report sales declines of over 20 percent and beg the taxpayers for loans, the economy may not be fundamentally sound.

The litany of bad news has to be weighed against good news, of course.

When gross domestic product grows at a 3.3 percent annual rate despite weathering a series of shocks, the economy may be fundamentally sound.

When inflation shows signs of moderating and the prices of important commodities return to more reasonable levels, the economy may be fundamentally sound.

When exports rise 20 percent from year-ago levels, the economy may be fundamentally sound.

When $3.5 trillion is parked in money market mutual funds and corporations have vast piles of cash sitting on their balance sheets, it's an indication that money remains available for investment and consumption, and that the economy may be fundamentally sound.

On the whole, however, a reasonable observer would have to conclude that, on balance, the fundamentals of the U.S. economy are less than sound. And even John McCain has recognized his mistake. After a day of withering criticism, he abandoned his previous position. Now he's calling the situation "a total crisis."

With research assistance from Sophie Gilbert and Abby Callard

© 2008