The contagion in the global markets is spreading like a brushfire and the shakeup that many of us have anticipated for over a year appears to be unfolding. Whether this is the �Big One� or not is irrelevant; a major downturn in the stock market will expose many of the systemic vulnerabilities in America�s �matchstick� economy and, hopefully, trigger greater congressional involvement.

Yesterday, Japan�s Nikkei 225 index fell for a fifth day in a row, wiping out 8.6 percent off the value of shares since hitting a seven-year high a week ago. The market declined by 3.34 percent to 16,642.25 points -- its biggest one-day fall in nine months [CNN]. The mood in the market is decidedly grim and normally enthusiastic investors are quickly dumping overinflated shares of popular stocks.

It�s a bloodbath and it�s bound to carry over into US markets where the damage could be considerably worse.

The catalyst for the global correction is the growing strength of the yen and its effects on the �carry trade.� Americans will be hearing a lot about the carry trade in the next few weeks as well as other unfamiliar terms. In fact, we�re all about to get a crash course in sub-prime loans, hedge funds, derivatives and the �global liquidity crisis.� These are the main factors involved in what appears to be the beginnings of a major stock market flameout.

In the next few weeks, we�re going to hear industry mandarins and banking chieftains blame everyone else for the disaster they�ve created. Overstretched and underpaid Americans will be blamed for not saving their paltry wages and people with poor credit will be assailed for taking out loans they had no realistic chance of paying back.

But the real culprits are Alan Greenspan and the Federal Reserve. These are the guys who engineered the lethal �low interest� policy (after the dot.com meltdown) and flushed nearly $10 trillion into the flagging economy. Greenspan created the biggest equity bubble in history and put America�s economic future on a treadmill to oblivion. Recent gains in stocks have been predicated on margin debt, shaky hedge funds, and a plethora of cheap money that has nested in the market; all of these are directly related to Fed policy.

The Fed increased the money supply at such a furious rate over the last six years that it�s inevitable that a certain amount of it would wind up in the stock market. That tells us that the skyrocketing market had less to do with growth (GDP) and confidence, than it did with the bundles of cheap greenbacks Greenspan sluiced into the system.

The American economy is built on a mountain of debt and an ocean of red ink. The masterminds at the Federal Reserve and the US Treasury think they can stem the tide of economic Armageddon by keeping the printing presses well-lubricated and running at full-tilt, flooding the market with worthless scrip.

But is anyone taken in by this charlatan�s game? Institutional investors are not scarfing down teetering US equities after an Asian freefall! Something else is going on here and it stinks to high-heaven.

�Faith based� policy has its limits as we�re finding out in Iraq. The men who control the economic levers can only achieve so much with smoke and mirrors. They can prime the pump and churn out the fiat money faster then anyone imagined, but eventually, reality will set in and the market will begin its inexorable march into the void.

Greenspan anticipated this crackup. Hell, he probably oiled the presses himself. That�s why he ambled off into retirement on a high note, leaving the rest of us to clean up his mess. He knows that current Fed Chairman Ben Bernanke�s cheery braying on Capitol Hill will amount to nothing; just like he knows that Treasury Secretary Henry Paulson�s baling wire approach to the economy is doomed to failure.

The �Maestro� has left us all in a major pickle. The stock market is flatlining, the recession is bearing down on us like a laser-guided missile, and Dear Alan is slathering on the sunblock at his favorite resort on the Riviera.

Ciao, Alan.