For the first time since 9-11, central banks around the world are pouring massive amounts of fresh new cash into their markets.

On Thursday alone, Japan pumped in $8.4 billion … Australia injected $4.2 billion … the U.S. Pumped in $24 billion … and the European Central Bank flooded its banking system with an unprecedented $130 billion! And on Friday, they did it again, opening the money floodgates in similar quantities.

Why?

Is the global economy suddenly contracting? No.

Are the world"s largest banks suddenly going broke? No.

So what has prompted these governments to pour out so much money so soon?

The answer:

Back in 1998, that"s almost what happened: Russia defaulted on its debts. A major hedge fund, Long Term Capital Management, collapsed. Banks recoiled in horror. Stock and bond markets nosedived.  And the world"s financial system was perilously close to the brink.

That was nine years ago.

Nine months ago, in our November 2006 Safe Money Report, we laid out a scenario of how this was likely to happen again and in a bigger way.

We explained how a mortgage market collapse would lead to a credit crunch, and how a credit crunch could threaten the financial system.

Plus, we pledged to monitor the situation and to alert you when we felt it was becoming an immediate danger.

Now, that time has come.

Just 48 hours ago, in its lead Saturday article, The Wall Street Journal"s headline declared …

"Tumult Is Testing New
Machinery of World Finance."

And just a few hours before, bankers all over the world also rang alarm bells — not just about turmoil in the mortgage markets, but also about …

• Turmoil in the market for commercial paper — short-term corporate IOUs that large companies depend upon for their immediate cash-flow financing.
  
  
• Turmoil in the market for credit-default swaps — investments that institutions rely upon to protect themselves against defaults by weak borrowers, and …
  
  
• Turmoil in the market for countless new investments that most people have never heard of.

I don"t care how remote or esoteric this may sound. I fear it could have an immediate impact on your money. And I feel you must have a good understanding of what it"s all about.

That"s why I am dedicating this morning"s message to the heart of the matter, namely …