Ha ha! We laugh at your puny global financial chaos!

Excuse us if we doubt that the housing bubble is solely responsible for Armageddon. And indulge us as we point out that a few weeks ago, when the Dow was sitting above 11,000, we bet that it would soon see the wrong side of 8000, a benchmark toward which it has obligingly slid. (Full disclosure: we don’t have a pot to piss in, but if we did we would’ve pawned it and bet the money on the south side of 8,000, thereby creating a conflict of interest. In other words, we wanted to have a conflict of interest but couldn’t pull it off.)

Back to the business at hand. Forgive us if this has come up elsewhere; we’ve been reading even less than has become usual. Is it even remotely possible that the housing bubble has taken down every stock market and most banks in the world? No, it is not. There’s something else going on here. What could it be?

Speaking several years ago, Dr. Doom — one of them, anyway; there appear to be several — told everyone to watch out for derivatives, about which I know little other than their dollar value is more than all the money that has ever been. He also said that the true value of the stock market following the dot-com bust was about 6,500, or what is technically called way less than it actually bottomed out at, which means it has been piling value on top of inflated value ever since.

As it plunges down the backside of the curve, it appears that the Dow may actually reach the 2008 equivalent of 6,500, and perhaps even less if everyone with influence over it keeps behaving stupidly. We have no idea what 6,500 in 2001 money is worth now, but it’s probably within 20%; the Dow will have arrived, according to the good doctor, about where it was supposed to have been seven years ago if it hits 6700 or so today (today meaning “in this period of darkness,” not, like, today today. When one thinks about it in that context, it doesn’t seem so bad.

But we digress, again. Obviously we’ve gone way beyond the housing thing, which was very bad, and into some new territory in which banks are even more afraid to lend each other money than they were a few weeks ago, when they were terrified. This can only mean that despite having effectively written off all the housing-related crap, and getting bolstered by $1.5 trillion of your dollars in the process, they’re convinced the other guy is holding still more crap which makes their promises to repay loans even more questionable.

Some of you have probably noticed that the press continue to trudge along behind the story. It occurs to us that perhaps they’re trying to act responsibly in a fashion consistent with their coverage from the beginning, which is to minimize the damage done and the dire flavor of our collective prospects. This is common in coverage of financial stuff, as per “we don’t want to panic the markets.” It has always struck us as stupid, since one wouldn’t refuse to cover a brushfire closing in on a subdivision in order to avoid panicking the residents. It’s not that you want to panic them, but you do want to convey an adrenaline-inducing sense of urgency. If they do panic, that’s their own business, and suggests to us that they have too little information rather than too much, and not incidentally that they were perhaps building in the wrong neck of the woods.

We are given to understand that the monetary rulers of the world are meeting to iron out all our problems as best they can. Our guess is that unless banks quit lying to each other and to regulators, of which many other countries have more and fiercer than we, whatever they do won’t stop the bleeding. We keep returning to the notion of derivatives, which in the context of their impossible value strike us as similar in concept to “end of the world insurance“: if anyone tries to collect on either, it will be too late.