Global markets remain jittery again this morning following another plunge in stock markets on Monday. Despite the euphoria following Secretary Treasury’s bail-out plan last Thursday, markets are worried about the plan’s massive costs, the dollar and whether Congress will balk at passing this important rescue package.

The odds are greater than 100% that Congress will pass legislation to rescue American financial markets. Anything less would imply financial suicide at a time of extreme asset price deflation attacking all markets and resulting in the worst purge on global portfolios since 1929. Not since the 1930s has there been such a violent destruction of credit, housing and equity values both domestic and especially foreign.

This is not about moral hazard. We’re not talking about bailing-out a troubled bank or brokerage firm. This is much deeper. Ardent conservatives vehemently against this government rescue would rather have another Great Depression than use taxpayer funds; this is really a moronic mindset when global capital markets are set to crush not only American markets but the majority of international markets, too. We’re all in this together.

Once markets calm down I’m expecting a rash of new government financial regulations, a slew of lawsuits facing financial firms and new guidelines on bank leverage ratios.

The entire gamut of capital markets will be transformed by government regulations, not unlike what occurred during the Great Depression when some of the most important financial laws were passed by Congress, including the SEC Investment Company Act and Glass-Steagall. The latter, by the way, which separated banking and investment banking, was repealed in 1999 and in hindsight was the dumbest thing the Clinton administration legislated. We’re paying the price for this now as some renegade investment banks have already failed; Goldman Sachs and Morgan Stanley, still independent for the moment, are no longer structured as investment banks.

I expect the Paulson plan to be passed this week by Congress. The country and, inevitably, the rest of the world will pay a huge price for the decline of American financial hegemony as the balance of economic power shifts in my lifetime from America to Asia, namely China.

These are really incredible times.