Excluding the first paragraph (announcing the decision and the listing voters), this week's Fed statement had 148 words. That is the longest Fed statement since June 2006 when the Fed last hiked rates. The Fed spent only 24 words discussing the current situation in the credit markets. Markets rallied as the Fed let everyone know that everything was going to be just fine, it is perfectly normal (healthy?) for bull markets to have corrections.

But wait a minute. If everything was daisies and butterflies on Tuesday, why did the Fed add $24B in temporary funds to the market today, when everyone expected $15B? The Fed underscored the idea that we have a problem on our hands. This might be the tip of the iceberg.

Excuse the cliche, but when America sneezes, the whole world gets a cold.

Europe has been hit with France's BNP Paribas halting withdrawals from three of its subprime-related funds that had fallen sharply  in value recently. Japanese banks have been quiet about their U.S. subprime exposure, and the silence is deafening. If you were the CEO of an influential financial institution and you had a manageable exposure to the subprime mess, wouldn't you want to tell the whole world you're fine with a stock price down 10%?

Oh, and before I forget, U.S. politicians are making China a scapegoat in the face of widespread economic insecurity among voters. The Chinese have taken off the gloves. Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion of foreign reserves as a political weapon to counter pressure from Congress. Such a move would cause a massive spike in U.S. bond yields, hammering the U.S. housing market and tipping the global economy into recession.

Don't worry folks. It's not all doom and gloom. The Plunge Protection Team will save us. 

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