Is our “Crash Alert” flag still on the mast? Yes it is...

“Stocks dive on bail-out rejection,” says the headline on today’s Financial Times .

“Panic grips world’s markets,” says The Guardian .

“Staring into the abyss,” shouts the Daily Telegraph .

“Sell! Sell! Sell!” was the advice from the Independent .

Writers had an easy time of it this morning as world stock markets had their worst day since Morgan Stanley began following them 38 years ago. The headlines practically wrote themselves. The MSCI was down 6%.

The House voted down the $700 billion bailout. Investors were downcast. They had hoped for an easy, quick rescue. The Dow fell 777 points – its worse day ever. For the S&P, it was the worse day since ’87. The Fed, however, didn’t want to leave investors disappointed.

“Fed pumps further $630 billion into financial system,” is the headline story from Bloomberg .

Let’s see, $630 billion is not much less than $700 billion. And here, the Fed acted on its own authority, needing no permission from the foot-draggers in Congress.

The Fed is “flooding banks with cash to alleviate the worst banking crisis since the Great Depression,” continued the story.

In the United States, the feds seized Washington Mutual last week. This week, Wachovia is the latest victim – selling itself in a hurry to Citigroup.

“Wachovia...we are here,” said its ad campaign. Bye bye...

Regional banks are falling hard, too – shares of National City, based in Cleveland, dropped 45%.

In England, Bradford and Bingley...and in Belgium, Fortis... were on the rescue list on Monday. Today, Hypo Real Estate, a large property lender in Germany, was thrown a lifeline by the government after its shares fell 71%. Iceland took control of one of its largest lenders too – Glitnir. And Dexia, in Brussels, is said to be getting desperate.

And the poor Irish! Their luck seemed to run out yesterday. The Dublin market sold off...as banking shares suffered their biggest one-day sell-off in 20 years. Anglo Irish Bank, a major property lender, dropped 45%. Regulators gathered round...wondering how to keep Ireland’s banks in business.

“Banks saved...” says the FT . All over the world, the rescue teams are at work. Bailing out the banks...forcing mergers and takeovers...nationalizing...

Meanwhile, oil slid 9%. Investors see the world slowing down – meaning, there will be less demand for oil. Last week, the Baltic Dry Index fell 25% – 10% on Friday alone. The index measures shipping costs...and roughly correlates with globalization, commodity prices and Chinese output. Typically, ships pick up iron ore or copper or wheat from, say, Brazil and deliver it to Asia. When orders fall, so does the index. Now, it’s almost in free-fall...down a full 70% from its May peak.

What this is telling us is that there has been no post-Olympic resurgence in China...at least not yet. Remember, in preparation for the games, the Chinese ordered their heavy industries to shut down. They were trying to give the athletes some air. Once the Olympics were over, these industries were supposed to rev up again – putting in huge new orders for raw materials.

So far...the boats are still riding high in the water. In fact, ships leaving Brazil are putting to sea empty – partly because Asian buyers are balking at Vale’s mid-contract price increase. Vale is the largest iron ore producer in the world. Sales must be falling...

What really is going on?

You will remember our dictum, dear reader: a correction is equal and opposite to the deception that preceded it. You can quote us, if you like.

The deception of the Late Bubble Period was mammoth. People deceived themselves in such extravagant and absurd ways, it took our breath away. That has been our beat, here at The Daily Reckoning , for the last 9 years – describing the delusions and hallucinations of the bubble era.

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.