Tuesday was UK zero-growth day, yesterday was German zero-growth day, and now today is US no growth and plummeting property prices day. We still see most of the media calling all this ‘disappointing’, ‘unexpected’ and ‘dashing hopes of a full recovery’. Presumably they have their own various agendas to think about, but future historians will wonder why not only did we not see this coming – we didn’t recognise it for what it was even after it had arrived.

I’ve posted a few times in the past about what happens when investors lose faith in the stock markets. After the predictable rallyette earlier this week, today the FTSE lost 4.5%, and the Dow 4%. The next challenge point for the FTSE is 5000: today it closed below 5100. As of today, Crash 2 is about to finish its first Act, because we can already see how the general retreat to safe havens is turning into a specific focus on buying US bonds, aka Treasury Bills (T-Bills). For the first time ever, 10-year US bonds fell below 2%. Buying of this Federal debt was  described as “frenzied”, as was that of 30-year US bonds, whose yields hit 3.34% – the lowest since January 2009.

The US fiscal mess thus finds itself (as we always knew it would) with a mega-cheap debt to service, but nowhere near enough economic or tax income with which to pay it off. And when repayment of debt is way beyond one’s means, the interest rate becomes academic. A plunging market for equities, however, means US companies starved of investment capital, as investors quit economic investment in favour of ‘safe’ investment in a Government which sooner or later must default. It’s quite bonkers, is it not?

Up until a few years ago, the Fed’s approach to maintaining unsustainable Dow levels was to discourage flight to the ultimate safe haven – gold – by manipulating its paper price down. But now that the Chinese and Indian stocks of shiny metal probably exceed what’s really in America’s deep gold reserves (and in the light of bank frailty, investors are specifying bullion more and more) they no longer have the clout to do that. Gold reached a new high of $1824 this afternoon, and is still bobbling around $1820.

So another bout of QE remains very likely in the US…..except that this too won’t truly stimulate recovery – but merely hold up the falling stock market. And if Bernanke doesn’t get a move on, it’ll be academic anyway.

But nil desperandum, because Christine Lagarde says that the idea of us having run out of options is completely false, and just more propaganda put about by…..somebody, we’re not entirely sure.

As usual, she’s talking rubbish. From here on, the sounds made by Western political leaders are going to seem increasingly risible. And the exponential speed of change will leave them even further behind the wave than they are already.