A permanent government agency dedicated to buying up bad debt? Banning short selling? Ah, to think every thing every thing was being re-examined, that all the assumptions about free-market capitalism were not being questions. Nope, the true believers are still in charge. And it doesn’t look like their faith has been shaken one bit.

What next? Laws that forbid the reporting of negative news? Perhaps government sensors will go over stock annalist reports to insure that there isn’t any thing that could “threaten our economic security.” Wall Street becomes a surreal landscape with moral officers arresting any who isn’t smiling. Like the security at Disney Land who police the fantasy, more than they insure public security.

But what’s their not to smile about? Privatizing the profits and socializing the losses has now become official economic policy. The new gilded age has been launched, where the fortunate few don’t even have to pretend to be competent any more, but just be in the game, and the government will by law insure they make huge windfalls on their investments.

Of course it is important to remember that the stock market is NOT the economy. And quite frequently, not even a good or accurate reflection of the economy. Wall Street has long been a fantasy land and playground for the well-to-do and well-connected, a place for the wealthy to escape economic reality that the rest of us have to live in. Wall Street is where the CEO is always right, and if he isn’t, you better dam well pretend that he is, if you want to keep your job.

So the notion that they would ban shorts (as a boggier pointed out, banning “naked” shorts last month apparently wasn’t enough) and a permanent bail out brigade with high pressure fire hoses made up of tax dollars, ready to put out market fires, really and truly comes as no surprise to me. These actions are like placing your head in the freezer when the house is on fire. Ah, but you sure got to admit that it feels good though, don’t it. So all this dose is add a little extra masking tape to the windows so that the master of the house can’t see the revolting presents outside the gate.

The question I have however is – how long will the new elusions will last? Banning shorts for example is only going to increase the severity of market crashes, as well as restore the “emotional dimension” to market down turns. True, their have been some horrific crashes this past week, but to see them on the floor, things are still quite orderly. This is because weak stocks usually have downward pressure at work on the, which serves as giant red flags. Stocks still crash, but not without warning.

One blogger explained it like this. If the market is like a jungle, then the animals are like your early warning system of danger. Normally, every one is chattering happily, but once the tiger is around, the noise changes drastically and in an alarming fashion. In this way, common investors benefit from watching the more experienced investors who have a little better idea of what to look for and what the warning signs are.

Not any more. With shorts now banned, crashing stocks will sneak up on people. And market crashes will induce the sort of emotional panic that hasn’t been seen sense the 20s.