This in turn created Libs:Libs/Libs, and Libs:Libs/Libs/Libs, and Libs:Libs/Libs/Libs/Libs...
This formula should clear up any confusion.
Seriously though, try looking for something like ASSIGN LIBS: LIBS:Libs anywhere in your startup sequence. It looks like you've got something like
LAB Loop
Makedir Libs:Libs
Assign Libs: Libs:Libs
Skip Loop Back
Yup, there's something strange on your system someplace.
