Reality strikes back [update 2]

“Malinvestment is always the result of the inability of human beings to foresee
future conditions correctly. However, such human errors and the resulting
malinvestments are most frequently compounded by the illusions
created by undetected inflation or credit expansion.”
- Ludwig Von Mises, Human Action

“The cause of the ‘bust’ is the same as the cause of the previous ‘boom’ – the
willy-nilly creation of credit out of thin air…  To understand the root cause of
this crisis you need to understand the root cause of ‘boom and bust.’”
– David McGregor, ‘The global financial/economic crisis: causes & solutions’

For decades, economies have been built.on a formula of fractional reserve banking and counterfeit capital—money created by banks out of thin air—debt, organised into currency.

This was the "new economy" proclaimed the fakers, an economic model in which production of real things was replaced with production of bank-created credit. Credit created out of thin air propping up prosperity created by illusion.

That unstable gallimaufry collapsed in the malinvestments of 2007 and 2008. And ever since, the fakers have tried to prop up their collapsing model of bank-created credit with trillions of dollars of government paper.

Such fakery can only last so long. Reality will out. All that "stimulus" flooded into the markets served only to resuscitate bad positions that should have been extinguished, and to inflate a (paper-based) "recovery" which allowed the gullible to think that reality had been faked once again.

But it hasn't been.

It looks like this morning, with markets ready to open again, that reality will reassert itself again.

The economic chickens are coming home to roost. Watch out for the fallout therefrom.

UPDATES  from around the traps:

• Dow Futures Are Now Open and Down 287.00 Points

• Gold Is Now Open And Up Over 44 Dollars

• The REAL Crisis is Finally Here... Are You Prepared For It?

• Highlights From G-7 Statement Which Basically Says That The Plunge Protection Team Just Went Global

• Crisis of the West

• U.S. Should Downgrade S&P

• A Few Comments On The S&P Downgrade from Jim Rogers Blog

• Going to Have to Face It You're Addicted to Debt

• It's the Spending, Stupid.

• Behind S&P's Downgrade of U.S. Government Debt

UPDATE 2:  More reaction":

• Don’t worry about US Government debt says the man who blew up the US housing bubble. “This is not an issue of credit rating,” says Alan Greenspan, “the United States can pay any debt it has because we can always print money to do that. So, there is zero probability of default."
  Yes, folks, this man was Chairman of the US Government’s money-printing wing for nearly twenty years. And you wonder why we’re all now in the mess we’re in!
• Meanwhile, there are alleged economists out there saying that even though the US Government’s debt situation was “abysmal,” even though they’re now struggling to pay for all the government paper they wasted,  they should have gone for way more than the multi-trillion-dollar stimulus they did.
  “What I want is more now," Christine Romer said about a bigger and better stimulus.
  Yes folks, this woman was Chairman of the Council of Economic Advisers under President Obama and chief architect of his stimulus bill. And you wonder, etc…