It was another insane day in the markets with all the usual patterns all but breaking down.

We got the complacency on Tuesday that we would have expected post statements by the Fed and the ECB (European Central Bank).

And then we got another very large one-day sell-off on Wednesday (is it really just Wednesday?) sparked mainly by fears over the debt crisis in Europe.

Complacency followed by sell-off…complacency followed by sell-off…a pattern seems to be emerging.

The question is what will break this pattern (and more importantly should we care about whether or not the DOW is trading at a certain level).

Monetary easing bullets will not work as well this time (it is arguable that they did not work the last few times either) contrary to what many claim.

The thinking goes that as rates go down, players will feel more comfortable taking on risk and buying stocks, consumers feel happier as stocks go up and thus they can spend more.

Wrong.

The sad reality is consumers continue to lose their jobs, fall into a vicious downward spiral, stop spending, and mouth off at the markets and politicians as stocks go up, boosted by loose monetary policy.

Any sustainable fix will have to deal with the fundamental problem dogging the economy and that is unemployment.

Simply re-inflating the asset bubble that bought us here in the first place is not a solution (and this time around it will not work).

The solution lies in the halls of Congress and not in Jackson Hole (where many expect the inauguration of a new round of loose monetary measures).

As we have discussed ad nauseum tax cuts are a key integral part of a sustainable strategy to fix the economy.

In the longer-term, bigger investments in education will help.

There are plenty of pork-barrel and inefficient government programs that can be cut to free up funds.

To start with, the government can start to shrink itself; it is surprising how few have commented on the massive proliferation of bureaucracy over the past few years.

Tax cuts will also lead to greater future tax revenues so talk of a "shortfall" is overblown; the size of the pie will get bigger.

As for Europe, the fix is not as easy.

At its core, Germany has to decide whether or not it wants to keep its export-driven empire going.

For all the talk of lazy Greeks being bailed out by frugal Germans, Germany could not have enjoyed the past few decades of economic prosperity without the jet-fuel brought to its economy in the form of the European common market.

Prosperity wise, what Germany failed to achieve with two world wars and insufferable blood and treasure, it has achieved through the European common market.

Simply giving all of that away is not an option.

Then again, one cannot eat one's cake and have it too.

The time for half-hearted measures should be over as the incremental cost of that inevitable bail-out only gets bigger the longer European bureaucrats dither.

Given that it is August and many are at the beach (probably in Greece no less), August will continue to be a volatile month.

In the corporate bond markets, there was a veritable deluge of primary corporate bond new issuance.

Issuer after issuer lined up, firing off salvo after salvo of benchmark sized billion-dollar plus bond deals.

The corporate bond deals were all priced very "cheap" but the concept of "cheap" is increasingly subjective.

Issuers are eager to lock in low interest rates that are near the all-time lows.

Demand is flaky, however; real-money investors are nowhere near as excited as they used be about new corporate bond issues.

If bank stocks continue to sell off their capital reserves will shrink and their appetite for risk will go down further.

With real-money investors and banks absent from the demand equation, spreads can re-price and widen out further.

It is a vicious spiral with the primary culprit low interest rates.

Ironically as things get shakier, investors continue to pile into Treasury bonds in a flight to quality, pushing rates that much lower.

When commodity trader Glencore decided to go public a few months ago, this player noted (in these very pages) that the market must have peaked.

Overall commodity prices are down significantly over the course of the past few months since the Glencore IPO (initial public offering).

That several of the large banks and dealers issued large bond deals recently should probably have served as a wake-up call for players that spreads would widen out significantly.

We are living in interesting times.

Initial jobless claims numbers are out tomorrow.