We've been transferring money to the financial industry for years now- this is nothing new. The juxtaposition of our major automakers and airlines laying waste to staff and slashing their wages and benefits as they reaped untold losses earlier this decade, and attendant wealth destruction, all while Wall Street was reaping bonanza profits (2004, 05 & 06 were banner years in the Bender family) was not a coincidence. The explosion of the wealth gap in this country, and geographically into centers of finance, (and away from people like, doctors, to financiers) was also not a coincidence.

Nor is the particular mechanism of support anything new. In 1998, following the LTCM crisis, Alan Greenspan used Fannie and Freddie to reliquify the financial system in much the same way outlined in this new proposal. In other words, Fannie and Freddie, as capitalized by auctions very heavily participated in by foreigners, were buying loans from banks hand over fist, (sound familiar?). Their books of business doubled in a short time, and bequeathed to us the final leg of the stock market bubble that closed the decade. Greenspan didn't do it to grease the hands of industry, he did it to protect his own reputation, and as a sure fire solution to political pressures (which are legion) on the Fed.

You see, there's this adage: if you owe the bank $100, you have a problem. If you owe the bank $1,000,000, the bank has a problem. The financial industry has just had the good fortune of being able to put a gun to its own head and demand recompense.

In 25 years the 'financial sphere', as Doug Noland likes to call it, has grown like a cancer around this country's economy (and the world's) with dramatic ramifications. Total debt to GDP in this country is close to 4 times what it was 25 years ago. This is a ratio, mind you, and it implies eye-watering debt growth. Financial system leverage & consumer indebtedness have exploded, and the debt party well and truly went global in the last decade. It has shaped everything from the organization of our labor force (think services oriented, especially financial), to the orientation of entire Asian economies (designed to cater to the indebted US consumer), to the savings behavior (or lack thereof) and lifestyle we have all become accustomed to, to the attendant profound implications on our culture and consciousness. It's all unsustainable, and none of it will be sustained.

As I said before: this malignancy cannot be removed at this point without killing the patient- our choice is simply to try, or to let it run its course.

Glenn,

If this momentum of which you speak builds and is ultimately successful in putting the breaks on the bailout plan, (and I give that about one chance in 20 million), you're going to wish it weren't. Not that you'll be right in that case, but I can promise you the 'no bailout' solution also happens to be the imminent 25% unemployment and potential dollar crisis/hyperinflation solution. I know this because Tyler knows this. Actually, I know this because we're about 10 years too late after 25 years of malign neglect for tough love for the financial system. We have two options: propagate for as long as the world's cognitive dissonance about the value of the dollar holds- maybe get another two to five years in- or call it the quits now. The latter is only slightly more likely to avoid the worst possible ramifications: a run on our currency.

I love that Bill Kristol has voiced his 'doubts' that the only thing standing between us and a full scale market meltdown is a $700bn blank check to the financial industry. He should know right, because he's typically so informed... Holy batman. Ben Bernanke has been studying Depression era dynamics his whole career and has full transparency into the industry at this point, and yet Bill Kristol's going to wade in there with his two cent head and Haaaavard education, or wherever it was he learned to be an intelligent sounding ignoramus with zero qualifications.

But I digress. Back to the subject of my post. The thing is, as with the Bush tax cuts and a whole host of other spending public and private, this bailout is going to be done with funny money. The treasury are going to have massive auctions, and the huge pools of savings outside this country (of which China is but one, and still a handy brand name) are going to loan us the money so as to keep us solvent so we can keep borrowing from them. It's a fascinating study in human behavior and its inherent rationality.

My advice to all of you is not to fight the bailout, and to put your savings in gold (even of the physical sense squirreled away at home- this is not a joke, btw). Also, if you'd like to seek enlightenment from people who've seen this coming from miles away, you should check into Doug Noland and Jeremy Grantham. You can enrich your newfound knowledge with a little Brad Setser.

How can a message test get around so quickly that people from all corners are reporting it straight away. That's a freaking push poll and if we allow this group to get away with saying otherwise we're doing ourselves a disservice, (btw, their explanation on Ben Smith's blog at first glance doesn't gel with this one).