Welcome To Global Death Spiral, Inc

We're starting to see the organs in the global financial "body" fail in real time. Nikkei dropped 10 percent last night, Euro markets are down 7-9%, and we're facing a similar day that could very well see the Dow sink below 8,000 as we head into the Columbus Day weekend.

The G7 meeting and Bush's speech will most likely leave us with nothing. The SEC's short selling ban on financial expired this week and remained expired. What happened yesterday afternoon was a classic short-selling hurricane.

Short-selling is simple: when you know the stock is going down, you sell high and buy low, and pocket the difference. If you sell 100,000 shares at $10 and buy them all back at $8, you just made $200,000 and you still have all 100,000 shares. The difference is YOU didn't take the 20% share price hit...some other poor schmuck did. You just picked his pocket.

Everybody on Wall Street did that late yesterday afternoon, turning a 100 point loss of a ho-hum day into another nearly 700 point massacre.

Asia and Europe have followed suit. The overnight LIBOR rate got cut in half, an excellent sign that we just might pull up before the plane augers in. But the 1 month and 3 month LIBOR rates, and TED spread all went UP, which is terrible news. It means that the 50 bp rate cut did almost nothing. It means banks are still terrified to lend to ANYBODY.

And now we're seeing another major stock in the same place where Lehman and WaMu were a few weeks ago: under $5 a share, having lost 30% from the day before after being downgraded as a credit risk, and circling the drain. The difference is this stock is GENERAL MOTORS.

Good, solvent companies are now facing bankruptcy because they are illiquid. They've invested long term and need to borrow short-term to make payroll and cover expenses...and they can't do it without paying rates that will put them out of business...and they can't move their long-term assets at all to raise emergency cash without losing so much on the deal they actually come out behind if they do it.

And the cure for all this -- flooding the market with central bank play money -- guarantees that if the plan works, we'll face a far nastier threat of hyper-inflation in the world's reserve currency. We'll have survived one global crisis only to create another far worse one...and that is the end of the ball game for the US economy.

Things are moving blindingly fast. Asian markets open for Monday trading at 8 PM Sunday night, about 60 hours from now. That's how much time the G7 has to come up with an answer. If they don't, next week may make this week's financial crash look tame. The Nikkei lost 23% for the week and other indexes have posted similar 20% weekly losses.

Next week may be far worse.

Strap in, kids. The reaper is here for his due, and the scythe is swinging through the rushes. Nobody knows where the bottom is now. Confidence is dead. People are short-selling to get cash and get out of the building. It's a stampede for the lifeboats.

And the lifeboats are gone. We sold them to China to get out of the last recession after 9/11.

Now we go down with the ship. And we're taking everyone else with us.

Welcome to the Global Market Crash of 2008. You have a front row seat to the end of history and the beginning of a new one.

Will the last short-seller turn off the lights when you're done?