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It was all about China once again, where following a report of a historic layoff in which China's second biggest coal producer Longmay Group fired an unprecedented 100,000 or 40% of its workforce, overnight we got the latest industrial profits figure which plunging -8.8% Y/Y was the biggest drop since at least 2011, and which the National Bureau of Statistics attributed to "exchange rate losses, weak stock markets, falling industrial goods prices as well as a bigger rise in costs than increases in revenue." In not so many words: a "hard-landing."

"He’s butchered his own people, he’s helped create this conflict and this migration crisis, he’s one of the great recruiting sergeants for ISIL."

The global Bubble is bursting – hence financial conditions are tightening. Bubbles never provide a convenient time to tighten monetary policy. Best practices would require central bankers to tighten early before Bubble Dynamics take firm hold. Central bankers instead nurture and accommodate Bubble excess. It ensures a policy dead end -  the faltering global Bubble has progressed beyond the point where Fed rate policy has much impact.

At the height of the financial crisis, the unprecedented decline in swap rates below Treasury yields was seen as an anomaly. The phenomenon is now widespread, as Bloomberg notes, what Fabozzi's bible of swap-pricing calls a "perversion" is now the rule all the way from 30Y to 2Y maturities. As one analyst notes, historical interpretations of this have been destroyed and if the flip to negative spreads persists, it would signal that its roots are in a combination of regulators’ efforts to head off another financial crisis, China selling pressure (and its impact on repo markets) and "broken" wholesale money-markets.

"This is a monetary moment... we are looking at the beginning of the world’s reappraisal of the words and deeds of central bankers like Janet Yellen and Mario Draghi. You see monetary disorder manifested in super low interest rates, in the mispricing of credit broadly and you see it in the escalation of radical monetary nastrums that are floating out of the various central banks and established temples of thought: Negative real rates, negative nominal rates and the idea of helicopter money. So you need some hedge against things not going according to the script and that makes gold and gold mining equities terrifically interesting now."

Are some Chinese banks ramping up their exposure to shadow conduits on the way to obscuring massive amounts of credit risk? Moody's says yes...

Some people will never learn... ever. What is happening today is nothing more than rearranging the deck chairs on the Titanic. The iceberg has been struck, we’re taking on water, and this sucker is going to sink. Game Over.

Did Goldman just hand out the blueprint to crush the next "Lehman" and unleash the next global bailout? Read on to find out.

The evening started on a high note when Janet Yellen's survival giving a speech warranted a 100 point rip in Dow futures (and USD strength). Then Japan stepped up with its first deflationary CPI print since April 2013 (which of course was met with stock-buying because moar QQE is overdue but that soon faded). EM FX is tumbling further (with Malaysia leading the charge). Chinese credit risk jumps tro a new 2 year high (as SHIBOR remains entirely manipulated flat) as China halts its 4-day devaluation with a tiny nudge stronger in the Yuan fix.

With the market's perceived risk of default across the energy space at record highs, it should be no surprise that willingness to lend (even for the greater-fool reach-for-yielders) is collapsing. As Bloomberg reports, oil services companies are finding alternative ways to raise cash and repay debt after falling crude prices has made it difficult for them to get funding from traditional sources. As one restructuring firm warned, "bond markets are closed for these companies, especially small ones, and banks may not be lending to them at this stage," with another ominoulsy warning, "getting new liquidity in this market could be a painful exercise. For many companies, financial restructuring seems inevitable."

AsiaPac stocks are broadly lower at the open, folowing US' lead as after being closed for 3 days, Japanese stocks open and catch down to global weakness with Nikkei 225 at 2-week lows. It appears it is time to "get back to work Mr.Kuroda," as stocks are below Black Monday's lows. Following last night's dismal data, China credit risk rose once again to new 2 year highs. Once again, industrial metals are under pressure with iron ore, copper, and aluminum all lower (following "peak steel" comments). After 3 days of weakening (and Xi's comments that China won't weaken), PBOC weakend the Yuan fix again, pushing the offshore-onshore spread to 2-week wides (over 500 pips apart).

There is blood on the streets wherever you look in Brazil today, but probably of most interest to the hundreds of US asset managers (the ones managing your mutual funds) is what happens to Petrobras as it remains so widely held. As we noted below, bond prices are collapsing and default risk is soaring, and with the nation's currency collapsing amid the lower-for-longer oil prices, $90 billion of dollar-denominated debt could soon potentially be too burdensome for the company to repay.

Newly-upgraded Portugal unleashed a budget bombsell on Wednesday when it revised its 2014 deficit higher by some 60% after a failure to liquidate the predecessor to bailed out Banco Espirito Santo left taxpayers holding a €5 billion bag. 

After 35 years of falling and now zero rates, the direction is only up for the cost of money, as is the cost to service debt, along with the burden to those who are most indebted (i.e. the U.S.). What should no longer be unthinkable is that the clock is ticking on America’s status as the holder of the reserve currency. If you still doubt this proposition, consider that China is in the process of setting up a third benchmark for oil, along with Brent and West Texas Intermediate, for trading oil futures contracts. And unlike the existing contracts, these will be traded in Renminbi. Who needs the dollar?