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Thursday May 6th, traders breathed a sigh of relief when the Dow ended the day down 348 points. On any other day, this would be terrible! But today was special.

Around 11:40 am Pacific time, the Dow suddenly plummeted by a thousand points as the result of a trade that, according to the rumour mills circulating around the market, entered a sell order for billions when it was supposed to be for millions of Procter & Gamble (PG) stock. “Doh!”. The stock was trading around $62.00/share and plummeted to $39.37 before almost immediately rebounding again to close at $60.75, down 1.41 or 2.27%. In addition, Accenture (ACN), went from over $40 to just $0.01 in the same few minutes before eventually recovering to $41.09, for a total loss on the session of $1.08 or 2.56%.

Trades that were more than 60% above or below levels at 2:40 PM EDT will be cancelled, Nasdaq said late Thursday. Yet that doesn’t compensate all that was lost so far.

According to the Wilshire 5000 (the broadest measure of the U.S. stock market, which reflects closing prices.), the overall market has lost around $1 trillion of value in the past three trading sessions.

Joe Average investors were directly affected today by computers selling stocks using high-frequency trading algorithms that kicked in with the sudden plunge in the market.

Thursday has been a blatant example of what Wall Street has become. Instead of being a provider of capital to finance growth in the economy, days like this make Wall Street seem as if it’s really just a casino; designed to separate the client from his money.

Even after Homer’s thousand-point drop was reversed, the major US averages still ended down more than 3% and holders of equities are left $1 trillion poorer than they were just three days prior. Something more than the careless actions of legendary trader Homer Simpson are at play here. Someone must have gained handsomely from the punters losses!

“Those losses, led by financials, were no glitch, but a clear reflection of the fact that sovereign debt woes due to indiscriminate Keynesian deficit spending is outrunning tepid global recovery and threatening the next financial blowout,” asserts Uwe Parpart, Cantor Fitzgerald’s chief economist and strategist for Asia.

“A machine or bad entry may have been the catalyst, but the scene was set for a big fall,” he continues. “The fact that gold prices jumped and barely came back down; that the euro dropped one big figure [that is, more than a full cent against the dollar] and stayed down; that oil tanked — and all that accompanied by a sharp unwinding of carry trades…amply proves the point.”

Beyond the monster, momentary glitches that sent the equity markets into freefall momentarily, it is the reemergence of the credit stresses that were at the core of the 2008 meltdown that is important.

In 2008, that was the result of funding difficulties by institutions left on the hook for errant credit decisions. In the case of Lehman Brothers, the U.S. authorities claimed they didn’t have the power to step in to stop the panic resulting from its collapse. When it came to AIG, they found the necessary authority to stanch the bleeding.

Ultimately, the federal government came to the fore with the much-criticized TARP, or Troubled Assets Relief Program. The Federal Reserve followed with its massive purchases of Treasury, agency and mortgage-backed securities totaling $1.75 trillion. The recovery in the markets roughly dates from the March 2009 Federal Open Market Committee when that program, commonly referred to as quantitative easing.

Now, with civil unrest in Greece instead of the collapse of US financial institutions, the ECB Thursday declined to take the same decisive actions that the Fed took in March of last year. For better or worse, the ECB refused to step in to monetize the debts of the beleaguered nations even as civil unrest continued in the Streets of Athens.

The aggressive actions to counter the credit crises in the US and the UK have been roundly criticized on the Right and the Left of both countries.

British authorities worried about civil unrest had they let Northern Trust fail. The run on banks and especially money-market funds could have been destabilizing in the US. Moreover, the steps taken to counter the crisis by the outgoing Bush administrations were continued and extended by the Obama administration.

The lesson is this goes far beyond some computer glitches, Homer Simpson’s trading skills or other technical difficulties. And the Greek crisis is no more just a European problem than the subprime mortgage collapse was solely an American problem. In sum, to think that this is only a momentary downdraft is a delusion. Hold on to your hat because we’re in for one wild ride!