The time is come to wake up and smell the scent of a monetary vacuum created within our banking industry by antiquated systems, rules and regulations. In particular, the $100,000 cap on depositor insurance.

This cap is causing fearful depositors, including companies, funds, non-profits and anyone with more than the cap allows to pull money from banks and move that to gold and Treasuries, thus draining our banks of liquid cash.

Such actions are causing an elevated level of crisis within the banking sector and further tightening credit to near zero. Only a few community banks around the country seem able to lend, but when these discover they’re relatively isolated, either they’ll stop or slow lending, or even worse, organize themselves into a shadow banking system outside the realm and control of the FED, Treasury and FDIC.

We cannot stress enough, the immediacy of this matter.

Tuesday, September 30th will be the last day of many companies’ fiscal year. Reporting will soon begin, perhaps as early as Wednesday. As government reports on unemployment, housing starts, foreclosure rates, bankruptcy filings and so on come into public view, panic will ensue and the DOW will drop dramatically, with potentially catastrophic results.

Indeed, this action is even more essential than the Paulson Rescue Plan. We are urging Congress to act immediately and to forget individual members’ desire to return to their districts to campaign, at least for the moment. The business of this nation is far more important than the business of re-election. Most of them will be re-elected anyway.

A recent unscientific poll within the financial community showed 51% against the Paulson Plan and only 43% in favor. Wall Street might be able to correct itself, provided the banks have the liquidity to resume lending.

In the meantime, reports are surfacing of Main Street problems due to this lending crunch. Ships, for example, are stuck in harbor, unable to offload cargo because they can’t negotiate credit to pay dock fees.

That may seem mild, but it’s only the tip of the iceberg. Many economists believe that we are only days away from the credit system, including ATM/bank cards slowing or stopping, and credit card processing coming to a grinding halt.

When that happens, a far worse panic will be created, potentially with riots on the streets. Wall Street would most assuredly crash.

By the way, in case anyone hasn’t noticed, we’re going through a quiet, electronic run on banks presently. Not like the runs of the 1930’s, but one in which depositors can electronically transfer funds out of accounts in an instant. No need to stand on line in front of the columned porticos of granite and marble edifices. Push a key on your laptop or mobile phone and it’s done.

We are now in a full-scale depression, complete with market crashes and bank runs. All this while the American public, and indeed the world watches partisan bickering over the Paulson Bill.

Our January 4th predictions have come into being and much as we regret it, clearly, Washington hasn’t been paying any attention.