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Nikkie under 9,000 and crunch time for the banks. Mizuho, the world's largest bank down 15% (the limit). What happens next? Any ideas?

central banks lose control of the gold price, it skyrockets, JPM and Citigroup are bankrupted, the Fed system is finally abandoned... maybe??...

I don't know what is next. I guess it depends on how big the bubble really is and whether or not this "correction" goes to far. Perhaps it already has.

I do know this. If the stock of these companies and banks were really any indication of their true worth, or even their projected worth, most would have all gone out of business and be bankrupt by now. Traditionally, very few companies could sustain a 40-60% loss of their worth and continue to operate. That tells us there was a huge bubble ... it's just a matter of how big it really was and how close the current conditions come to setting it srtaight IMHO.

Heavy falls on Wall Street overnight had accompanied bad news from a string of companies, including chipmaker AMD which warned of rising inventories and falling sales - a worrying echo of the situation as the tech boom turned to bust two years ago.

I've got an idea! AMD should sell a buttload of chips to Intel, and Intel should sell the same amount to AMD! Presto, instant profit!

Didn't think I'd see the Nikkei below the Dow in my lifetime... it's getting close.

1) It is now not possible for the Japanese markets to have a soft landing (due to the government not able to sell all of its bonds recently)

2) Only two possible options exist - both are painful. Fix it now and fast and hope the fixes restore confidence. Wait and drag it out (what is going on now)

3) The fast fix would require three phases:

Phase I - Prevent Banks from counting stocks as liquidity. The must use cash, government bonds, or unfettered investment grade commodities actually held

Phase II - Require Banks to liquidate the worst performing loan in there portfolio every 3 months until they are left with only positive performing loans.

Phase III - Restructure Banks so that investments are managed by seperate firms. Banks would be prohibited from owning shares or bonds in other companies, only investment firms would be allowed and then only on behalf of actual clients (401 or private accounts).

Each phase needs to be implemented at 6 month intervals. The sooner they get started the better. But it will be painful.

South America next?

Understand, the new guy is actually a past player in the regulatory fight in Japan who was known to be urging greater efforts to clean up the banks. The extra institution he was just given control over is the regulatory body with oversight for the banks, which was defending them, sheltering them from admitting insolvancy or being closed, looking the other way at their accounting games to stay open, etc. The falls in the bank shares obviously reflect a belief that he is serious and will outright close some of the insolvant banks. Which means the depositors in them will get whatever their assets are worth, and the shareholders won't get anything.

Closing failed banks is the right thing to do, and long overdue. It is also, however, contractionary in the short term if done alone. It looks like they will finally go ahead and let the big failed ones fail, without any "too big to fail" nonsense shielding them anymore. They ought to accompany such moves with public bailouts of the better ones (in return for changes in management and coming clean about accounting games etc), with monetary stimulus by the central bank (printing more money), and with tax cuts. The other measures would offset the short term macro damage from closing the old banks, and allow the clean-up to proceed.

Understand, the banks have been broke in all but name for quite some time - in the sense of unable to meet Basel capital standards for international banks except through accounting games. They have been protected by regulators afraid to let them fail, because afraid of the overall economic damage it might cause, and because of inside dealing between the politicians and regulators and the old bankers. They wanted to wait for something to save them, or to use public money to cover their old mistakes with "no strings attached" bailouts. Pay us off with taxpayer money or we will fail and take everything with us, that was the threat. Looks like this guy is calling it.

They used to say Japan was the one country where communism worked ... until 1989.