The world’s head was spinning faster than Linda Blair’s; its markets falling quicker than a dead body off the Jersey bridge; the wailing was louder than Jamie Lee Curtis’s famous screams in Halloween.

Look at the carnage since August 4:

Dow down 15%
Nasdaq down 23%
FTSE down 13%
DAX down 17%

But to ulitmate lows? Let’s look again:

Dow down 31%
Nasdaq down 35%
FTSE down 32%
DAX down 37%

Asian markets were hit even harder: The Nikkei has dropped 30% since August 4, but had dropped as far as 47% at its ultimate lows. The Hang Seng in Hong Kong was the worst performer of major, though. It has fallen an amazing 36% since August 4, and a whopping 53% at its ultimate lows.

Not even India’s Bombay exchange has fallen as far as the Hang Seng.

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As the bottom falls out of the dollar, and people’s cash goes up in a mushroom cloud of smoke, someone’s going to make a lot of money… from foreign currencies

I’m reading all the front pages this morning, and I’m seeing nothing but fear:

Bloodbath
Global Rout
Panic Selling
Roller Coaster

It’s enough to make seasoned brokers and pit traders jump out of windows, not to mention the folks who’ve watched their retirement funds lose $2 trillion (over the past year and a half). It is truly a global market meltdown.

And it would seem that there’s no safe place to run anymore. Even commodities are flopping like a fish out of water.

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With banks dropping like flies here in the U.S., one must accept that this shake-up cannot be contained within U.S. borders.

Indeed, banks in Western Europe are already following U.S. institutions into the dark abyss, and now the European Union must decide if some “bailouts” will be allowed. For example, the EU is now reviewing its decision to allow a $7 billion bailout of German bank West LB.

And some regions are looking to preemptively bail out its banks.

Ireland has just announced that it will guarantee all deposits, bonds and debts for the country’s six largest banks for the next two years.

It’s a controversial decision that some say will give these Irish banks - with international branches - an edge over other banks. But it’s also in line with what the European Commission has been wanting… Well, sort of.

The EC wants banks to, in essence, hoard cash. Like a rainy day fund, just for times like these.

According to the Commission, banks should put away more cash in order to be able to cover its riskier investments.

Of course, that makes sense, but I don’t think a lot of banks will be able to pull that off in this type of environment. In fact, this may have a negative effect. If banks take more liquidity out of the markets, there will be less money to lend, and less revenue for the bottom line.

So should governments step in and foot the bill, or should the responsibility rest solely on the shoulders of the financial institutions?

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