(Washington, D.C. : Right Commentary): As the saying goes, “Everyone’s your brother till the rent comes due.” Well friends, this week, the rent really came due when the House vote on HR 3997 skidded out of control and ended in a complete wipeout. In response, the US stock market imploded - dropping more in one day than in the history of the market. World wide, financial markets imploded as the date line marched around the world. In response, world leaders called on the US government to take action to stave off global financial collapse.

Yesterday, the German Financial Minister said the US would lose its superpower status as a result of the financial crisis. It was times like that when I miss being a political appointee. I would have been happy to have been quoted abroad saying “Think again sauerkraut boy!” Nevertheless, despite the errant German being a bit miffed that the Bundesbank is not in the drivers seat… most of the world’s leaders went into complete freakout mode over the abandonment of Uncle Sam at the helm of the USS Capitalism.

“The US must take its responsibilities in this situation, must show statesmanship for the sake of their own companies and for the sake of the world,” European Commission spokesman Johannes Laitenberger said.

German Chancellor Angela Merkel called for another vote on the plan this week to restore market confidence. Apparently she believes that Obama’s speech in Berlin also provided her a seat in in the House (and given some of the crazy things I’ve heard Obama’s team say - that discussion may not be too far away).

British Prime Minister Gordon Brown said he had sent a message to the White House to underline “the importance that we attach to taking decisive action”. Wow - that’s some decisive action.

New Japanese premier Taro Aso said: “We should not let the world financial system collapse.” Genius - those Japanese - pure Genius!

Australian Prime Minister Kevin Rudd said that he and other US allies would press Washington to take action. Press all you want mate - no wine coming from those grapes! Time to just sit back and put greenbacks on the barbie and sing “Waltzing Matilda!”

… but this all isn’t very funny is it.

All kidding aside - world markets, and their national leaders, are becomming increasingly attune to how much the US really does control the world’s financial markets. Thus, while the “bomb” may have gone off in the House yesterday - the collateral damage spread around the world until the US markets opened this morning. While the market did recover about half of what it gave up yesterday - the increased volitility just shows how panicked people are getting about the credit freeze.

US Treasury Secretary Henry Paulson warned US lawmakers they had to act fast after his plan was dramatically rejected Monday. ”Markets around the world are under stress,” he said.

“We need to get something done,” Paulson added. “This is much too important to simply let fail.”

The world wide financial system is struggling under the strain - with central banks pumping in billions of dollars over the past 48 hours and the now familiar cycle of bank failures spreading beyond America’s shores. French-Belgian bank Dexia was rescued by the French, Belgian, and Luxembourg governments which put in 6.4 billion euros (9.2 billion dollars). Governments also had to step in to save Dutch-Belgian bank Fortis and Britain’s Bradford & Bingley this week.

The euro fell again, to 1.4376 dollars in London from 1.4432 in New York because “credit worries are deepening over the European financial system,” said Saburo Matsumoto at Sumitomo Trust Bank.

“The euro may fall further,” he said. “We fear the credit worries may spread into emerging economies.”

A state of fear is causing a desperate shortage of funds in the interbank system, despite infusions from central banks, and is a critical factor in pressures that have brought down many top names in US and European banking. There are rumors that some countries have refused to lend in the interbank system in order to limit their risk to US capital markets. The shortage of cash is also being driven in part by concerns of a world-wide run on financial intermediaries. Banks around the world are finding it nearly impossible to judge their short-term cash needs and are holding onto every dollar they can find.

Ultimately, how Europe will deal with this problem will differ significantly from the United States. There is clear evidence that European central banks will most likely nationalize failing institutions. Unlike the US Congress, there is a strong institutional bias towards market intervention (even when the markets are not in crisis). I’m not saying this is a good thing, however, I am pointing out that Europe will likely move more quickly than the United States to attempt to restore market liquidity.

“The way we do things in Europe will be different than in the US – and that’s a good thing,” says Philippe Martin, an economics professor at the Sorbonne in Paris. “It’s moving towards the nationalization of banks, which is the right model.”

“Some banks will fail, but there won’t be a Paulson plan for Europe,” he adds. In the US, the taxpayer bears a significant portion of the risk. “Nationalization means we give you money, but we take the power. We fire the management, and when the situation gets better we sell the assets and the government makes a profit on some assets.”

Nonetheless, the financial community in Europe is eager for the US to resurrect the bailout plan. Economists and investors expressed their frustration Tuesday, while leaders and financial authorities in Paris, London, Rome, and other centers huddled to ensure that the US inaction would not upend their own financial systems.

“There is anger and frustration and a complete lack of understanding for self-indulgent politicians who clearly live on another planet,” says David Buik of Cantor Index, a commodities spread-betting firm in London. “We can’t believe this for a minute, we hope and think it’s just posturing. There has to be a deal after Jewish New Year.”

The reality remains, that any European nationalization project hinges on utlimately the US restoring financial stability and liquidity to the world financial system.

Willem Buiter, a former member of the Bank of England’s monetary policy committee, wrote that hope remained that the US House of Representatives “will be frightened by its own audacity and will reverse itself.”

If not, he said in a published commentary, bank lending would dry up, panic selling would ensue even of unblemished assets, household-name banks would collapse, and financial anarchy would ensue leading into “the Great Depression of the 2010’s.”

Europeans are tentatively pushing for an international conference to address institutional reform and regulatory changes. Mr. Sarkozy has called for a summit to take place in November. Brown told the UN last week that there was a need for global oversight with “colleges” of regulators to keep tabs on the largest institutions.

No offense to our European colleages - but I hardly see how some posh meeting in Davos or the like is going to bring stability to the financial system.

As European central banks quickly run through their reserves (which are paltry even in the aggregate when compared to the almost trillion dollars the Fed and Treasury have outlayed in the past 3 months), the mood internationally becomes grim.

If the US does not act decisively and pump cash into the capital markets - we will continue to witness the world financial system grind to a halt.

Is Nero taking any requests? Personally, I’d suggest “Near’er my God to thee…” as the water keeps filing in the boat.

If we don’t stop the flooding soon… we’re all going to the bottom. It’s that simple.

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