Everything I've learned about economics tells me that: a) because of the risks involved in lending to the US, and the massive amounts involved, interest rates should be skyrocketing; b) this endless expansion of the money supply should be producing galloping inflation; c) the fact that so many financial institutions own huge chucks of "toxic waste" paper and declare them as assets on their books should lead to a wholesale dumping of these stocks and a massive fall in stock prices. And yet, the DOW sits at over 10,000, inflation is modest, and interest rates are not at 15%. What gives?

It may just be that the US itself is "too big to fail", that the huge international creditors and those who run the Central Banks and Finance Ministries around the world have decided to simply swallow these useless assets and buy rapidly devaluing US Treasury Bills becauase they have no alternative in mind. Like the Politburo members who went to see Stalin a week after the German invasion in 1941 (Stalin thought they had come to arrest him--he was having a nervous breakdown at the time and had sequestered himself in his Dacha), the big money men from around the world are simply waiting for their orders from Washington while the metaphorical Panzer Divisions sweep deeper into the economy. They have been taking orders since 1944 at Breton Woods--perhaps the system persists because nobody can imagine it not existing? Until the realization hits that the game is over, the players will take it at least once around to the dealer, even if they are playing with fake money.

So why, then, with this galactic-sized pile of unpayable debt, is the dollar not collapsing, inflation at 200%, and interest rates at 20%? I just don't understand how this thing is staying relatively stable if the emperor is now standing naked in the square, other than by a collusion of the most powerful lenders and investors to pretend that it all isn't really happening, that, as Kevin Bacon screeches in Animal House, "ALL IS WELL!" while they loot the Food King. What is propping up the stock and Treasury Bond markets and keeping them from imploding? Anybody out there have a guess?

This bill exists to prove to the investor class that they will not be abandoned by Unlce Sam in their hour of diminishing returns. These folks, and the few dozen banks, brokerage houses, and insurance and investment firms that represent them, are sitting, as one poster here endlessly reminds us, on alot more than just crappy worthless amortized mortgages. They are sitting on derivatives and other "insturments" that represent trillions of dollars that somebody potentially or actually owes somebody else. This "market" is a house of cards, and depends on the "confidence" of the investor class to keep afloat. If you sock these buggers with a call on their cash in one market, it disrupts others, as they scramble for liquidity. So long as they all agree that the emperor does have a lovely suite on, and nobody issues a cascade of margin calls, the system can survive until somebody, God help us, fixes it. If confidence is shattered, and these people get into panic mode, then the stock market would collapse, trading would be stopped, credit could disappear, and we'd likely be back in 1931. Much as I detest these robber barons, the system is set up around them, and until it is dismantled (and not blown apart--the result there would be fascism)we do not want to cut off our nose to spite our face (or at least I don't).

I'm a fair approximation of a Socialist, or at least a Social Democrat in the old 1890-1933 German sense of the term, and I am FOR a bailout bill, although I am not sure (nor is anyone else) if this current Pelosi/Frank/Obama bailout bill is a good one. Since the USA is not even remotely close to thinking the way I think about many issues, I am realistic about what can be accomplished. Since the downside of not getting a bailout is an economic catastrophe, and given the fact that those who will pick up the pieces in a post-disater America will want to put people like me into camps, I feel discretion is the better form of valor. Until we can imagine replacing The Beast, we will have to feed it and hope it does not bite us.

but this Senate bill is even worse then the House bill that died on Monday. And this one they voted for! Insane. Like Don Corleone, the Senate made the house an offer they couldn't refuse--all the pork you could imagine, for only the price of a massive bailout of the finacial sector with few strings attached and those strings being pulled by Wall Street foxes guarding the chicken coop. This bill is a complete abdication of responsible governance. Republican obstruction was better. Instead of writing a superior bill, the Senate simply bought off the necessary number of wafflers in the House and handed the ball to Paulson. Perhaps that's all the titans of finance around the globe needed to get their mojo back. Perhaps this is enough to convince everyone that the problem is under control and the endless sham of trading paper around and calling it "wealth creation" will continue. Capitalism seems to be endlessly capable of reinventing itself and labelling shit shinola. Like religion, it's built on faith, and reason hasn't exactly ran that magical thinking out of town. So perhaps this will work. But those of us in the reality based comunity have to imagine that it won't.