Europe is imploding. Today S&P cut Belgium's credit rating to AA:

S&P projects Belgium will end 2011 with general government debt at around 93% of gross domestic product in net terms, and at around 97% of GDP in gross terms.

Italian bond yields hit 7.8% and that's a 14 year high for borrowing costs and a doubling in a matter of days. Unlike the Fed, Italy cannot print up more Euros either to take care of their problem.

The Italian Treasury paid 6.504 percent to auction 8 billion euros ($10.6 billion) of the debt, almost twice the 3.535 percent a month ago and the highest since August 1997. Italy’s two-year bonds yielded a euro-era record 7.83 percent, almost 50 basis points more than 10-year notes.

Yesterday Moody's cut Hungary to junk status. Junk means not ready for prime time, or investment.

The U.S.-China Economic and Security Review Commission has issued their new, comprehensive annual report on China for 2011. The 414 page report (large pdf), is a comprehensive, with details on trade, economics, currency manipulation, development strategy, military actions and human rights abuses.

Financial markets rise and fall based on the perceived value of the products being sold. But there are occasions when market value is affected by the condition of the marketplace itself, and whether the infrastructure that supports the market is structurally sound. This is the situation investors are now facing. There is rottenness apparent in even the largest and most trusted markets, like the US Treasury market, and investors are beginning to question how safe their funds are, or whether the protection being bought is worth anything. Private money is nervous, or it is fleeing the markets altogether. When so many different markets are afflicted by the same creeping structural weakness, it is no surprise that the average investor begins to ask whether Financial Armageddon may be upon us.

There are a number of recent cases where the “system” did not work the way investors expected, especially in the case of the collapse of MF Global, and the less-publicized ruling that banks would not have to pay out the protection they sold investors who bought credit default swaps covering a potential Greek government default. Before we turn to these specific and highly consequential events, we should look at the some of the precedents which reveal a history of rule-changing by banks and regulators that inevitably has worked against the interest of investors.

Rules Can be Changed for the Benefit of the Market Makers

The motto of most police departments is to serve and protect. They might tack onto the end of that phrase banks, Wall Street and powerful people. The below photo, by Randy L. Rasmussen, The Oregonian, captures people getting attacked with pepper spray when protesting in front of JPMorgan Chase Bank.