Sound the alarm bells! A collision with reality is dead ahead!

The elephant in the room blasted out a mighty honk last weekend in a report by Access Economics, as reported in today’s Australian. “Batten the hatches,” Access says. “This is not just a recession. This is the sharpest deceleration Australia’s economy has ever seen.” Access adds that the federal budget is “buggered.”

“Leading economic forecaster Access Economics warns in its quarterly Business Outlook, released today, that the nation’s economic boom will ‘unwind scarily fast’, halving corporate profits, costing more than 300,000 people their jobs and blowing out the current account deficit to more than $100 billion.”

Dire stuff indeed. But the question from last week remains, is this massive dose of negative…

– The Nikkei 225 got wiped this morning in Asian trade. Japan’s benchmark index lost another 11% of its value. It is now touching 20-year lows.

– Other world markets India dropped 9.6% as Mumbai opened for business. South Korea fell as much as 9%, Hong Kong by 9.7%, Australia by 8.4% and in Singapore lost as much as 8.4%.

– European equities “collapsed,” according to the Financial Times, “left vulnerable after a dramatic late sell-off in New York extended the sustained losing streak on world stock markets.”

Brazilian metals and mining company Vale (NYSE:RIO) has canceled its iron ore shipments to China until the country’s steelmakers cough up more dough. But China has other ideas. Vale may find its products aren’t as vital as it originally thought, says Stephanie Grimmett.

Well that didn’t work out at all. Investors had a full weekend to think about the details of the worldwide plan to save markets. And then they became terrified. They sold shares and bought commodities.

The proposed $700 billion safety net for banks and lenders hasn’t stopped the Dow from sliding over 200 points today. Neither has the SEC’s temporary ban on the short selling of 799 financial institutions.

According to Dan Denning in The Daily Reckoning Australia, the ban could actually make the crisis worse. That’s because investors could be reluctant to take up long positions in stocks when they cannot hedge their risks with short plays.

If confidence is not restored quickly, the next logical step for regulators would be to close the markets altogether…

The Reserve Bank of Australia (RBA) has cut its benchmark rate 25 basis points to 7%. This has sent the Aussie dollar and local stocks tumbling.

Chuck Butler says only one more rate cut is likely this year. Charles Delvalle, meanwhile, expects dividends on Austrialian companies BHP Billiton (NYSE:BHP) and Rio Tinto (ASX:RIO) to fall as the Aussie dollar weakens against the greenback.

Al Robinson at The Daily Reckoning Australia says the RBA is caught between fighting higher prices and a stagnating economy. But he says local mining stocks still a good bet…

The Daily Reckoning’s Dan Denning says Australia needs to get serious about the energy debate. Australia is rich in resources, but too much bureaucratic red tape is beginning to scare away foreign investors. Nevertheless, Aussie resource firms provide many excellent investment opportunities, some of which are not on the radar of institutional analysts…

Gabriel Andre uses technical analysis to forecast the movements of Macmahon Holdings Limited (ASX:MAH). This penny stock made 150% of gains during a six-month period last year, before retracing this year. But Gabriel thinks it could soon be testing the resistance at its historical high of $2…

We are seeing mob behavior in the financial markets, says Al Robinson in The Daily Reckoning Australia. The country’s main stock exchange, the ASX, is following the Dow Jones Index on its various ups and (more frequent) downs this year.

Australian Federal Treasurer Wayne Swann has approved the sale of 11% of Rio Tinto (ASX:RIO) to Chinalco. The Daily Reckoning’s Dan Denning says this is just more evidence of foreign interest in Australia’s mineral deposits.

Faced with this reality, Dan says the government needs to decide whether Australia is for sale or not.

One thing for certain, as emerging giants like China and India increase their per capita income, the chase for global resources will become more intense. And Australia will be in the thick of the action…