We can solve this panic. And finally the developed world’s finance ministers are meeting under enormous pressure because markets are in "freefall" according to traders. For those of you who slept well last night, here is what happened. At the open of Tokyo’s stock exchange, the market dropped straight down almost 10%. It then wallowed the rest of the day. This patten was repeated in Europe. Stock prices "rolled off the table." Tokyo ended down 10%, to almost where it fell just before the Iraq War. European markets rolled off the table, and rebounded, right now down around 5%.

It was clear to economists like James K. Galbraith and Paul Davidson, that the solution was not in the realm of high finance, but in the underlying mortgages. Only when there is a bottom to the basis of money, which in our case is assets like houses, will there be a true bottom to the market and the economy.

It is not that "people could not pay back their mortgages," because default rates are high, but not unbearably so. It is that because of the crash in real estate, when someone did not pay back their mortgage and the bank foreclosed, the bank could not get the value of the mortgage back, and it took a long time to sell, or it was forced to take a bigger loss. Blaming a few poor borrowers who were robbed by banks is something that only people in Wingnited States of Nutmerica can believe for long. It was the credit bubble, not the foam, that brought this on.

Paulson has dithered, a point not lost on Dean Baker, who has heroically spoken truth to power about the emptiness at the core of the bail out proposal. Instead, the global consensus is to recapitalize. Paulson may finally be seeing the light. But he is going to have to step up to the plate.

This is a deep mess, because ultimately it rested on trying to print paper to buy oil, and then consume the oil present, rather than investing in the post-oil future. We ate the seed corn, and that decision was made in 1979 and 1980, when Thatcher and Reagan came to power. They thought of themselves as sane, but now, we see, that their world has gone mad. And Ben Bernanke, who is earning the nickname "Captain Carnage," and Hank Paulson, while they are to blame for the final blunders, were merely executing on a plan that came from the White House to try and get oil the old fashioned way: steal it.

This then, is the balloon payment on the Iraq War, and the final cost of 2000’s grand theft: election.

Stirling Newberry

Stirling Newberry