Holy Moly, Batman

The Bear Sterns disaster was just barely averted, and now Lehamn Brothers is the next domino:

The swap spreads on Lehman Brothers rocketed to 465 yesterday, mirroring the moves in Bear Stearns debt days before. Fannie Mae and Freddie Mac - the venerable agencies created by Roosevelt that underpin 60 percent of the $11 trillion mortgage market - had a heart attack on Monday. Their bonds were in free-fall, threatening to set off another cascade of bank writedowns.

These are not sub-prime outfits. They sit at the apex of the US mortgage credit industry. Hence the dramatic move by the Fed this week to offer a $200bn lifeline, agreeing to accept Fannie Mae and Freddie Mac issues as collateral.

The 'monoline' bond insurers - MBIA, Ambac, and others - that guarantee most of the $2,600bn market for US municipal bonds have seen their shares collapse by 90 percent since the Autumn.

Cripes... anybody who still thinks the stock market is near it's bottom, or that it's "resistance" level will prevent further downturns, has been asleep at the wheel.

Is it just a U.S. problem?

We are now experiencing the first truly major crisis of financial globalisation," said the Swiss central bank governor Philipp Hildebrand this week.

"Never before have banks seen such destruction of their balance sheets in such a short time. Moreover, there are signs that the problems are spreading. The risk premiums on commercial property, consumer credit and corporate loans have risen sharply," he said.

Debt levels have been much higher than in the Roaring Twenties; the new-fangled tools of structured credit are more opaque: the $415 trillion nexus of derivative contracts is untested. Nobody knows for sure if the counter-parties are able to deliver on vast IOUs, or whether the construct is built on sand.

New-fangled. Opaque. Untested. Built on sand.

Our hair-raising roller coaster ride is about over... It's becoming a downhill slide into hell.

If you have any cash(like in federal reserve notes) stashed away, be prepared to watch it devalue into scrap as the federal government - in a last-ditch effort to avoid our looming global financial disaster - throws literally trillions of paper dollars at the problem.

Bush has just told us to "be patient". That's one of our two relatively non-violent options. Our other option was shown to us by - of all people - Jesus of Nazareth. He threw the money lenders out of the temple.

The third option? We get to use up all our stockpiles of ammunition.