Tuesday morning the Asian markets got even worse.

Japan’s Nikkei 225 index nose-dived 5.7 percent — its biggest percentage drop in nearly 10 years — to 12,573.05, a day after falling 3.9 percent. Australia’s benchmark index sank 7.1 percent, the market’s steepest one-day slide in nearly 20 years.

Well, that’s not good, is it? If this was a one-day steam pressure release on the markets, today would have been better, yes?  Bargain hunting?  A collective pause to catch the world’s breath?

They’re pausing just long enough to take a deep breath…so they can scream more on the way down.

Hong Kong’s Hang Seng index, which slumped 5.5 percent Monday, finished down 8.7 percent. In China, the Shanghai Composite index lost 7.2 percent to 4,559.75, its lowest close since August.

Indian Finance Minister P. Chidambaram urged investors to remain calm after trading in Mumbai was halted for an hour when the stock market there fell 10 percent within minutes of opening. The Sensex rebounded some later to finish down 4.6 percent.

“There is no reason at all to allow the worries of the Western world to overwhelm us,” Chidambaram said.

No reason at all.  The fact that the US financial industry is the linchpin of the global credit shell game and it’s completely falling apart is no reason for concern, especially when your market “fell 10 percent within minutes of opening.”

Everything is fine!  The US doesn’t matter to the global economy, despite the fact that international oil transactions are done in US dollars.

You know, those same US dollars that are no longer accepted in India’s Taj Mahal.

European markets, which fell sharply Monday, were volatile Tuesday. By midmorning the U.K.’s FTSE 100 had slipped 1 percent, Germany’s DAX dropped 2.9 percent, while France’s CAC 40 declined 1.1 percent.

Investors have dumped shares in frenetic trading the last two days on worries that the U.S. economy, battered by a credit crisis and housing slump, will shrink in coming months, weakening demand for exports.

There is also skepticism that American authorities will be able to prevent a recession. The Federal Reserve has indicated it will lower interest rates further, and President Bush has proposed an economic stimulus package that includes $145 billion in tax cuts, but investors around the world are doubtful that the measures will lift the economy quickly.

“Unless we get some positive ‘shock effects,’ such as drastic measures from the U.S. government, there is almost no hope for a recovery in stocks,” said Koji Takeuchi, senior economist at Mizuho Research Institute in Tokyo.

So what are these “drastic measures” the US government should take?  Nobody seems to know, precisely.  What the experts do know is that what Bush is planning to do isn’t enough.  They also know we’re hopelessly trapped in Iraq, spending billions of dollars a day in a futile effort that has accomplished almost nothing other than killing tens of thousands of Iraqis and 3,000+ US soldiers.

Those soldiers that do survive are coming home with a host of mental, psychological, and physical injuries.  But we of course choose to spend our money…and our soldiers…to death.

The rest of the world has gotten infected by the global con game of SIVs and CDOs.  It’s introduced the most lethal disease into the global markets:  uncertainty.  Nobody knows just how much everyone else has lost.  Nobody’s sure if they have a land mine in their books. And most of all, nobody’s sure if the people who owe them money are going to pay them back or not.

That last point is the one that will bring the markets down.  Hell, it’s bringing the markets down right now.  We don’t have a solution.  They don’t have a solution either.  Nobody does.  Not only do we not have the answer, but they see we’re pretending this problem doesn’t exist, and that problem has cost markets fully ten percent plus of their value in 2 days.

So from here on out it’s going to get scary bad.  Watch the markets this morning.  In particular, watch how quickly we get to the trading curbs.  If it takes more than 30 minutes I’ll be very surprised.

Martin Luther King Jr. Day, 2008.  The day the US officially lost global financial leadership status.  We actually lost it long ago, but now that global vote of no confidence is official.

The question now:  Is this going to be just an absolutely miserable week, or is this the start of a complete collapse of the global game?

We’re about to find out.  And it’s only Tuesday.  Today it’s our turn.  How low can you go?  Everybody limbo!

Actually, limbo’s a pretty good descriptor of where our financial future is under Bush.  Nobody knows for sure.

But all they know is that the herd is spooked, and the stampede is here.  Today.  Now.

Update [2008-1-22 8:54:18 by Zandar1]: Holy Hell, the Fed just took a hammer to the overnight rate decapitating .75% off of it.

Folks, this is not the act of a Fed that thinks it is in control. This is the act of a Fed that is scared out of its collective mind. They know what’s coming. And they also haven’t learned a damn thing. Greenspan’s super-cheap credit after 9/11 is what led to this mess in the first place. He tried to inflate our way out of a recession with Bush’s blessing. All he did was create the situation you’re seeing playing out today. Remember, the Fed’s rate cut doesn’t do a damn thing to address the uncertainty problem. How much is hidden on the books at YOUR bank?

You thought inflation was bad before. We’re now looking at the Fed’s response, and the Fed’s response is inflation that won’t do a damn thing to boost the economy because we still don’t know where all the land mines are buried. It won’t help. It will however create stagflation or even deflation.

It’s like trying to stop a boulder rolling downhill by standing in front of its path and blowing as hard as you can. Get ready for one hell of a day.

Update [2008-1-22 13:37:2 by Zandar1]: Dow’s still down, but not as much. Let’s keep in mind the Fed hasn’t cut rates like this in decades. More cute are expected at next week’s Fed meeting. And how are the people who got us into this mess reacting? Why, they are delighted and want more.

As Congress looks at taxes, they should think about the one pressing need in today’s loan-problem story. Namely, asset values are falling. This needs to be stopped. The answer? Eliminate the capital-gains tax both for individuals and corporations. This will spark higher asset values by increasing the after-tax present value of future cash flows. They also should cut the corporate tax rate.

To put it simply, stop the multiple taxation of capital.

Last week Bernanke said the dividend tax-rate cut should be made permanent and that doing so would help the economy in the short-run. Good for him. Abolish the dividend tax altogether. It’s just more double-taxing of capital. Anything Congress does to reduce the cost of capital and raise investment returns will help.

We may be closer to a stock market bottom than many believe. This correction is already about 20 percent. There are a lot of great stock market bargain values. Smart investors always look to the long-run. Don’t worry about timing anything.

The world is not coming to an end. Our free-market capitalist system goes through periodic corrections and cleansings. It’s the natural order of things. Things are going to be okay.

So remember kids, everything’s fine! We’ve spent ourselves into an economic coma with trillions in runaway deficit, but the answer is clearly to cut taxes if not abolish them altogether. Just what we need. More deficit. It’s like trying to fix a flood by adding more water so it will of course flood back out.

Permanent war, permanent deficit, permanent screwing of the economy until it breaks. So what happens when we run out of rate to cut?