The short argument against not just banking, but the world, has come true.

A short strategy generally circles in on a particularly weak dynamic for a business. For example, climbing oil prices could precipitate a short strategy for a manufacturer that relies on oil to fuel its production plant. As an investor, you measure the inputs and if the climbing price of oil will drag down the company’s earnings beyond the forecasted range, you short the company.

Well, an input of the world’s economy is now officially going to weigh on earnings for nearly every company — or at least that’s how it seems right now. The distinct lack of liquidity in the banking system affects so many industries. Yes, I mean entire industries, which will find their earnings dragged down by the credit crisis. Banking for sure. Finance, yes. How about any company with heavy inventory and production demands? I would say so, because their short-term capital requirements are acute. The list goes on. When you couple this capital-centric short strategy with rapidly declining equities, you are faced with a global economy in freefall. Oh wait, that’s what we have already.

How to resolve this? It is looking as though only a worldwide effort by the vast majority of the globe’s nations can resolve this. Credit needs to shore up for a vast swatch of the world, for without a comprehensive rescue, capital will deplete in pockets and that too will drain on the world’s economy. The Middle East needs to be involved. Asia, too. South America is heading for massive recession because of its easy-credit practices of the last few years fueled by high commodity prices. The G7 meets today, and we all know they are talking about the global meltdown. Unfortunately, there needs to be a G192 — every member state of the United Nations needs to be engaged in this. Yes, it’s that daunting. Yes, it’s that unlikely to happen.