What started it?

China finally came out and admitted it - they can't delink with us, and in fact they have banks over there who have problems caused by our subprime slime.

Peter Schiff, eat my shorts. Your clients are fixing to get a pounding up their backsides if they were following your thesis that "the rest of the world will be ok".

Two days of declines sequentially in global markets, and the crack *****s are back out on the street screaming for more drugs in the form of "A Fed Fix."

Never mind that The Fed doesn't set interest rates, and besides, isn't it time that the crack ***** detox and put her trash out in the street instead of stinking up the kitchen?

Perhaps the markets think not, but I think so.

Let's cut the crap here and put reality on the line.

We still do not have clarity from our financial institutions. We still have banks who are playing "Level 3" games with their balance sheets. We still have, believe it or not, banks making mortgages to people without any material amount of money down on the table with "back end" ratios in the 40s and even reaching 50% allowed.

There is no "hyperinflating" out of this. It will not happen, and those who think it will need to put down the crack pipe made out of pure tinfoil and insert a new brain to replace the one they fried listening to all the crooners and toofers who pollute our cable TV spaces and the blogosphere.

The global selloff in equity market is not a crisis. China's market doubles in a few months and then when it has a 30% decline people come out screaming for more drugs?

Oh, you mean stocks can only go up? Apple to $300, Google to $1,000, RIMM to $200, as Cramer and others have claimed? Like in 1999? Or is that like houses? Affordability doesn't mean anything? Earnings which have hit a cyclical peak and started to decline don't count any more? We don't pay for earnings growth any more, we simply want prices to go higher so we can have yet another bubble?

How about some reality here.

• We are in a recession.
• It is a consumer-led, classical recession.
• It will be deep and long, because our binging on cheap, intentionally under priced credit was unbelievably overextended.
• Commercial credit demand will contract and the velocity of money already has, and this will continue. The Fed will follow the short-term commercial credit demand down resulting in zero or near-zero interest rates, but The Fed does not control this process and never has.
• This will not end until all of the bad debt is recognized and defaulted, and rational lending guidelines have returned to the debt markets. For instance, 30 year fixed mortgages with 20% down, 6 months of seasoned reserves, and no more than a 36% "back end" ratio. No more "negative roll" auto loans. In short, no more crack for the *****; she has to detox and put her clothes back on.
• The more our government meddles in trying to put more crack on the streets the longer and more painful the process of taking out the trash will be.

Last night the S&P futures went lock-limit down for the first time since the tech wreck in 2000. 1255.50 pinned them - no bid.

Then, right around 3:00 AM, people started bidding cautiously on yet more rumors that the Crack Dealer would be pumping out drugs yet again.

Guys, why do we have this garbage floating around trading desks? Why should The Government guarantee anything? Monolines? Interest rates? More crack for the *****? Why?

How about this - how about if you're over leveraged, you FAIL and go down the toilet!

From every corner there comes a demand to prop up this and that. Its the monolines, its the mortgage bonds themselves, its one thing or another (or, for that matter, all of it!) Calls for RTC V2 come fast and furious, with Cramer leading the charge with a $250 billion mop and dustpan.

Not only is this crap it must be avoided at all costs, for down this road lies another Depression similar to what we experienced in the 1930s.

Why?

Because if you prevent people from suffering the consequences of their failures and yet try to "monetize" the losses what happens is that those with money to lend, which the Government and private industry both rely on, take their ball and go home! After all, the first rule of investing, whether you're investing in debt or equities, is don't lose the principal!

This credit mess was NOT an accident.

It was the result of intentional mispricing of risk for profit and hundreds of billions of dollars were siphoned off by everyone in the chain from mortgage brokers to investment banks.

Those who were responsible for this must be forced to eat their losses.

You want to see 20% interest rates again? Preventing the recognition of those losses by the guilty parties will insure it as those with actual money say "no mas!" and put their funds somewhere that fraud and blatant theft are punished instead of being rewarded.

You CANNOT force someone to lend. Our government must have credit available to it in order to function. The cost of that credit must remain rational or the squeeze on the federal budget and ultimately the people will make what is going on now look like a Girl Scout picnic.

It is time to cut the crap and take our medicine.

But heh, let's have one more hit off the crack pipe eh? BenDover sure thinks so in that he's playing "bitch" to the market. Fine and well; now let's watch him have fun defending it; the futures sure as hell didn't buy it, within 20 minutes they pinned the lock limit level again, bleeding off the ENTIRE pump they got originally!

Gee, what's the truth here?

That's simple: Commercial credit demand and monetary velocity has gone off a cliff and we are rapidly sliding towards ZERO on the FFR; it will make no difference at all just as it didn't in JAPAN!

Here's your technical!