The Troopergate Bomb Drops

Sarah Palin has been found to have "violated the public trust" of Alaska.

Republican vice presidential nominee Sarah Palin abused her power as Alaska's governor in the firing of her public safety commissioner, but violated no laws, a report for the state Legislature concluded Friday.

Public Safety Commissioner Walt Monegan's refusal to fire Palin's ex-brother-in-law from the state police force was "likely a contributing factor" to Monegan's July dismissal, but Palin had the authority as governor to dismiss him, the report by former Anchorage prosecutor Stephen Branchflower states.

If this had been Joe Biden, we would have public cries for Biden to quit the ticket. This is standard Alaska GOP, no maverick, no reform, just the same abuse as you always see.

Toast. Over. The fat lady on stage shortly, the stake has just been driven into the heart of the GOP.

Having said that, Obama's response should be nothing. The second he attacks Palin on this, the McSame camp gets to play the sexism/reverse racism card of Scary Black Man Hurts White Woman, and more importantly the subject changes from the economy. McSame would love nothing more than for Obama to make this crucial mistake.

Barry won't fall for it. There is nothing to gain by attacking Palin at all now. The damage is already done to her credibility. The only thing she even came close to having on her side was the fact she wasn't as corrupt as the rest of the Alaska GOP. Guess what? She is.

The economy is not only far more important, but it's a 100% guaranteed loser for McSame. Period.

History Says We're Fine

The Republicans are clinging to today's John Steele Gordon piece in the WSJ like it was the last lifeboat on the Titanic. The theme? This is just another financial panic we have every 20 years and we'll be fine with a strong central bank! (also it was Thomas Jefferson's fault, the bastard.)

We paid a heavy price for the Jeffersonian aversion to central banking. Without a central bank there was no way to inject liquidity into the banking system to stem a panic. As a result, the panics of the 19th century were far worse here than in Europe and precipitated longer and deeper depressions. In 1907, J.P. Morgan, probably the most powerful private banker who ever lived, acted as the central bank to end the panic that year.

Even Jefferson's political heirs realized after 1907 that what was now the largest economy in the world could not do without a central bank. The Federal Reserve was created in 1913. But, again, they fought to make it weaker rather than stronger. Instead of one central bank, they created 12 separate banks located across the country and only weakly coordinated.

No small part of the reason that an ordinary recession that began in the spring of 1929 turned into the calamity of the Great Depression was the inability of the Federal Reserve to do its job. It was completely reorganized in 1934 and the U.S. finally had a central bank with the powers it needed to function. That is a principal reason there was no panic for nearly 60 years after 1929 and the crash of 1987 had no lasting effect on the American economy.

Look, even I can figure out the "strong central bank" was the major culprit in this mess. Alan Greenspan's Instant Credit Bubble decimated this country when it exploded in our faces, and it was the efforts to get us out of the recession of 2001-2002 by the same central bank that created this terrible problem, combined with Ben Bernanke's complete inability to do anything about it. I don't need a econ degree to see common sense. And speaking of common sense, here's a guy with a complete friggin lack of it.

In the 1990s interstate banking was finally allowed, creating nationwide banks of unprecedented size. But Congress's attempt to force banks to make home loans to people who had limited creditworthiness, while encouraging Fannie Mae and Freddie Mac to take these dubious loans off their hands so that the banks could make still more of them, created another crisis in the banking system that is now playing out.

While it will be painful, the present crisis will at least provide another opportunity to give this country, finally, a unified banking system of large, diversified, well-capitalized banking institutions that are under the control of a unified and coherent regulatory system free of undue political influence.

First of all, Congress did not force anybody to make loans. The banks made these loans freely because they were making money on them hand over fist by securitizing them and housing prices kept going up. Predatory loans made to people who had to accept usurious rates to get a home AT ALL because of the ridiculously overpriced housing market were the order of the day. Blaming the people who were talked into loans by brokers who made no effort to determine creditworthiness of people in the first place is like blaming the victim of a mugging for being stupid enough to carry cash.

Second of all every step of this crisis was political, with the goal to further the "Bush Boom". Treasury and the Fed were just as politicized as every other department in the Bush Administration, and the cronyism and greed and deregulation was there to make money by making the bubble bigger and bigger and bigger. Purely political, all the way.

It's ludicrous. This is unlike any other panic before because we've never been in such a bad across the board situation, so far in debt, so unable to manufacture our way out of the problem. We should have taken the pain years ago. We didn't. It's literally orders of magnitude worse now.

We're in uncharted waters. Here there be dragons.

The Nationalization Of US Banks Begins

I'm watching Hank Paulson on TV right now officially announce his plan to purchase stock in US banks to shore them up.

U.S. Treasury Secretary Henry Paulson said the U.S. will buy equity in a ``broad array'' of banks and other financial institutions to restore market stability and ensure economic growth.

The Treasury is ``working to develop a standardized program that is open to a broad array of financial institutions,'' Paulson said today in a statement at the end of a meeting in Washington of finance ministers and central bankers from Group of Seven countries.

The injection of equity is part of efforts to sustain banks and other financial institutions through the worst credit crisis in seven decades, including takeovers by Treasury of American International Group Inc. and Fannie Mae and Freddie Mac, the largest U.S. mortgage finance companies.

The Treasury, under the equity purchase program, would not be involved in bank management, Paulson said. Equity purchases would take place alongside Treasury's coming program of ``broad'' mortgage asset purchases, he said.

``Such a program would be designed to encourage the raising of new private capital to complement public capital,'' Paulson said.

``Any equity the government purchases through a broadly available equity program would be on a non-voting basis, except with respect to the market-standard terms to protect our rights as investors,'' he said.

Krugman is on MSNBC saying that without a blanket guarantee for all interbank lending (which the plan completely lacks), the plan is "halfhearted". Unless the plan gets "a whole lot stronger in the next 48 hours, we're in trouble," he said. Britain's plan announced earlier today did both, resulting in what could be a 30% government stake in banks. It has largely failed so far because of the international scope of the crisis, for it's not just the US that must guarantee all interbank lending but all the G7 countries.

Krugman is right, absolutely. The G7 plan is looking more and more DOA. The Nikkei opens in 48 hours. Without a plan that includes that G7 blanket interbank lending guarantee, the markets will collapse...and the interbank backstopping is just a small part of what absolutely needs to be worked out this weekend.

The clock is ticking.

Without a massive plan, this week will not end up being "the worst week in Dow history" for much longer.

Don't Make Me Pull This Global Financial System Over

With the promise of unprecedented global financial action resulting from the G7 meeting today giving a last hour boost to the Dow and basically being the last shot we have to stave off disaster, odds are already looking pretty grim as Italy has already said that it won't sign off on the deal.

Finance ministers and central bankers from the Group of Seven nations met for crisis talks in Washington amid an unprecedented public split over what to say in their joint statement.

The draft communiqué under consideration is ``too weak'' and fails to reflect the gravity of the financial turmoil, Italian Finance Minister Giulio Tremonti told reporters in Washington before the talks began. ``We won't sign it.''

While Britain has pushed for a coordinated agreement to guarantee loans between banks, one official from a G-7 member said it was unlikely the G-7 would endorse their proposal. Two European officials said earlier that the group was considering saying that no systemically important bank would be allowed to fail, and laying out principles for all nations to follow.

G-7 economic leaders ``have never released a statement that they have not reached consensus on,'' said Jenilee Guebert, senior researcher at the G-8 Research Group at the University of Toronto. ``It would be unique. At this stage, however, for him to be saying this doesn't necessarily mean it will transpire.''

In one reversal earlier today, Italian Prime Minister Silvio Berlusconi said governments may shut financial markets, only to take back the remark later. White House spokesman Tony Fratto said there would be no interference in market openings or closings.

The G7 are hoplessly split at this point. Nobody wants to admit that if the US economy collapses the rest of the world will go into a depression...but nobody can afford to bail us out. Nobody wants to be the sacrifical lamb to save America, but if America's economy is not bailed out, the game ends for everyone.

We're counting on a miracle that will not happen.

The Dragon Eats Its Own Tail

John McSame made it a point to announce "his mortgage plan" at the debate on Tuesday. Since then, the wingnuts have completely turned upon him and his failing campaign.

In a sharply worded editorial on its Web site Thursday, the editors of The National Review -- an influential bastion of conservative thought -- derided the plan as "creating a level of moral hazard that is unacceptable" and called it a "gift to lenders who abandoned any sense of prudence during the boom years."

Prominent conservative blogger Michelle Malkin went one step further, calling the plan "rotten" and declaring on her blog, "We're Screwed '08."

Matt Lewis, a contributing writer for the conservative Web site Townhall.com, told CNN the plan only further riles conservatives upset with McCain's backing of the massive government bailout plan passed last week.

"Fundamentally, the problem is John McCain accepts a lot of liberal notions, unfortunately. There is somewhat of a populist streak," he said. "Most conservatives really did not like the bailout to begin with, and this was really kind of picking at the scab."

It's not just the plan conservatives are unhappy with, but how it was first unveiled as well -- out of the blue at Tuesday's town-hall debate during which Republicans were instead hoping McCain would present a spirited attack on what they view as Obama's overly liberal positions.

"Here we are watching the debate hoping this is a good format for John McCain to excel at, and the first thing he does is spring this on us," Lewis said. "This is not a good way to win friends and influence people."

When the Maverick strays from Bush too far, the wingnuts put him back in his place. But the real problem Malkinvania and her ilk have with McSame?

He's losing to Barack Obama and there's not a damn thing he can do about it.

Bush's eight years of corporate conservatism didn't fail...John McSame failed.

And the bullies of the right don't like a loser.

Last Stand At The Alamo

When Paul Krugman sounds like Nouriel Roubini, you know the fecal matter has impacted the oscillator here on a day where the Dow is down 500 at 3 PM or so.

Last month, when the U.S. Treasury Department allowed Lehman Brothers to fail, I wrote that Henry Paulson, the Treasury secretary, was playing financial Russian roulette. Sure enough, there was a bullet in that chamber: Lehman’s failure caused the world financial crisis, already severe, to get much, much worse.

The consequences of Lehman’s fall were apparent within days, yet key policy players have largely wasted the past four weeks. Now they’ve reached a moment of truth: They’d better do something soon — in fact, they’d better announce a coordinated rescue plan this weekend — or the world economy may well experience its worst slump since the Great Depression.

Let’s talk about where we are right now.

The current crisis started with a burst housing bubble, which led to widespread mortgage defaults, and hence to large losses at many financial institutions. That initial shock was compounded by secondary effects, as lack of capital forced banks to pull back, leading to further declines in the prices of assets, leading to more losses, and so on — a vicious circle of “deleveraging.” Pervasive loss of trust in banks, including on the part of other banks, reinforced the vicious circle.

The downward spiral accelerated post-Lehman. Money markets, already troubled, effectively shut down — one line currently making the rounds is that the only things anyone wants to buy right now are Treasury bills and bottled water.

The response to this downward spiral on the part of the world’s two great monetary powers — the United States, on one side, and the 15 nations that use the euro, on the other — has been woefully inadequate.

Roubini too is talking about a laundry list of action that must come from this weekend's meeting or the game is over.

At this point severe damage is done and one cannot rule out a systemic collapse and a global depression. It will take a significant change in leadership of economic policy and very radical, coordinated policy actions among all advanced and emerging market economies to avoid this economic and financial disaster. Urgent and immediate necessary actions that need to be done globally (with some variants across countries depending on the severity of the problem and the overall resources available to the sovereigns) include:

- another rapid round of policy rate cuts of the order of at least 150 basis points on average globally;

- a temporary blanket guarantee of all deposits while a triage between insolvent financial institutions that need to be shut down and distressed but solvent institutions that need to be partially nationalized with injections of public capital is made;

- a rapid reduction of the debt burden of insolvent households preceded by a temporary freeze on all foreclosures;

- massive and unlimited provision of liquidity to solvent financial institutions;

- public provision of credit to the solvent parts of the corporate sector to avoid a short-term debt refinancing crisis for solvent but illiquid corporations and small businesses;

- a massive direct government fiscal stimulus packages that includes public works, infrastructure spending, unemployment benefits, tax rebates to lower income households and provision of grants to strapped and crunched state and local government;

- a rapid resolution of the banking problems via triage, public recapitalization of financial institutions and reduction of the debt burden of distressed households and borrowers;

- an agreement between lender and creditor countries running current account surpluses and borrowing and debtor countries running current account deficits to maintain an orderly financing of deficits and a recycling of the surpluses of creditors to avoid a disorderly adjustment of such imbalances.

At this point anything short of these radical and coordinated actions may lead to a market crash, a global systemic financial meltdown and to a global depression. At this stage central banks that are usually supposed to be the "lenders of last resort" need to become the "lenders of first and only resort" as, under conditions of panic and total loss of confidence, no one in the private sector is lending to anyone else since counterparty risk is extreme. And fiscal authorities that usually are spenders and insurers of last resort need to temporarily become the spenders and insurers of first resort. The fiscal costs of these actions will be large but the economic and fiscal costs of inaction would be of a much larger and severe magnitude. Thus, the time to act is now as all the policy officials of the world are meeting this weekend in Washington at the IMF and World Bank annual meetings.

Basically what Krugman and Roubini are talking about here is a Global New Deal. Anything short of that will lead to a multi-year global depression.

Barack Obama at least seems to understand what is at stake judging from his speech today in Ohio.

We meet at a moment of great uncertainty for America. In recent weeks, we've seen a growing financial crisis that's threatening not only banks and businesses, but your economic security, as well. It's getting harder and harder to get a loan for that new car or that startup-business or that college you've dreamed of attending. And yesterday, millions of Americans lost more of their investments and hard-earned retirement savings as the stock market took another significant plunge.

We need action now. The Treasury Department must move as quickly as possible to implement the rescue plan that passed Congress so we can ease this credit crisis that's preventing businesses and consumers from getting loans. And we also must recognize that this is not just an American problem. In this global economy, financial markets have no boundaries. So the current crisis demands a global response. This weekend, finance ministers from the world's major economies will meet in Washington. They must take coordinated steps to restore confidence and to maintain our financial markets and institutions.

It's frightening. But I do not see any other way around this crisis...and the most disturbing part of all is that Bush and Cheney are still in charge, not Obama, for another three months plus. It's three months we don't have...we may not survive the month without immense political will, determination, focus, and more than a bit of luck.

Good luck to us all. We will need it.

Chaos Erupts, And You Are There

Dow hovering around the 8,200 mark at noon or so. It was down below 8,000 before bargain hunting began, but it's still waffling.

Grain shipments are being stalled out due to the credit crisis now.

The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.

Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don't trust the financial institution named in the buyer's letter of credit, analysts said.

"There's all kinds of stuff stacked up on docks right now that can't be shipped because people can't get letters of credit," said Bill Gary, president of Commodity Information Systems in Oklahoma City. "The problem is not demand, and it's not supply because we have plenty of supply. It's finding anyone who can come up with the credit to buy."

Repeat this for any other major commodity: Grain, rice, food, basic supplies, oil, gas. The credit crisis is causing breakdowns in the supply chain, leading to shortages on the way, and along with a trashed dollar: the perfect recipe for hyper-inflation.

It will be a bitter winter.

Wells Fargo Wins Wachovia

Citigroup has pulled out of talks for Wachovia, paving the way for Wells Fargo to become the third largest bank in the country.

Banking giant Citigroup said Thursday it had ended talks with Wells Fargo about reaching an agreement to acquire parts of the struggling bank Wachovia and is no longer looking to buy any of Wachovia's assets.

Citigroup also said that it would not seek to block the merger agreement between Wells Fargo and Wachovia but that it would still seek damages from the two banks for breach of contract.

Wells Fargo has submitted an application to the Federal Reserve Board seeking expedited approval of its merger with Wachovia, the company in a joint statement with Wachovia.

The Wells Fargo deal is much better for Wachovia than the one Citigroup was offering.

I think long-term Citigroup will be glad it didn't pull the trigger on this deal. Let Wells deal with it. Then again, who knows if either one will be around in a year?

Welcome To Global Death Spiral, Inc

We're starting to see the organs in the global financial "body" fail in real time. Nikkei dropped 10 percent last night, Euro markets are down 7-9%, and we're facing a similar day that could very well see the Dow sink below 8,000 as we head into the Columbus Day weekend.

The G7 meeting and Bush's speech will most likely leave us with nothing. The SEC's short selling ban on financial expired this week and remained expired. What happened yesterday afternoon was a classic short-selling hurricane.

Short-selling is simple: when you know the stock is going down, you sell high and buy low, and pocket the difference. If you sell 100,000 shares at $10 and buy them all back at $8, you just made $200,000 and you still have all 100,000 shares. The difference is YOU didn't take the 20% share price hit...some other poor schmuck did. You just picked his pocket.

Everybody on Wall Street did that late yesterday afternoon, turning a 100 point loss of a ho-hum day into another nearly 700 point massacre.

Asia and Europe have followed suit. The overnight LIBOR rate got cut in half, an excellent sign that we just might pull up before the plane augers in. But the 1 month and 3 month LIBOR rates, and TED spread all went UP, which is terrible news. It means that the 50 bp rate cut did almost nothing. It means banks are still terrified to lend to ANYBODY.

And now we're seeing another major stock in the same place where Lehman and WaMu were a few weeks ago: under $5 a share, having lost 30% from the day before after being downgraded as a credit risk, and circling the drain. The difference is this stock is GENERAL MOTORS.

Good, solvent companies are now facing bankruptcy because they are illiquid. They've invested long term and need to borrow short-term to make payroll and cover expenses...and they can't do it without paying rates that will put them out of business...and they can't move their long-term assets at all to raise emergency cash without losing so much on the deal they actually come out behind if they do it.

And the cure for all this -- flooding the market with central bank play money -- guarantees that if the plan works, we'll face a far nastier threat of hyper-inflation in the world's reserve currency. We'll have survived one global crisis only to create another far worse one...and that is the end of the ball game for the US economy.

Things are moving blindingly fast. Asian markets open for Monday trading at 8 PM Sunday night, about 60 hours from now. That's how much time the G7 has to come up with an answer. If they don't, next week may make this week's financial crash look tame. The Nikkei lost 23% for the week and other indexes have posted similar 20% weekly losses.

Next week may be far worse.

Strap in, kids. The reaper is here for his due, and the scythe is swinging through the rushes. Nobody knows where the bottom is now. Confidence is dead. People are short-selling to get cash and get out of the building. It's a stampede for the lifeboats.

And the lifeboats are gone. We sold them to China to get out of the last recession after 9/11.

Now we go down with the ship. And we're taking everyone else with us.

Welcome to the Global Market Crash of 2008. You have a front row seat to the end of history and the beginning of a new one.

Will the last short-seller turn off the lights when you're done?

StupidiNews!

• The Troopergate report on whether or not Sarah Palin abused her power in office as Alaska Governor is to be released today.
• Global "panic selling" has gripped Asian and European markets.
• Lottery winners are actually going for long-term annuities as better deals in today's market.
• Casino proponents here in Kentucky have a new target: internet gambling sites.
• The Phillies take Game 1 of the NLCS.

Global No Confidence Vote: Bush Boom Kaboom

October 9 is a very important date in the recent history of the Bush Economy.

On October 9, 2002, the Dow hit its lowest point so far during the President's two terms: 7,286.27.

On October 9, 2007, the Dow hit its highest point in the Bush Presidency: 14,164.53.

Stocks drifted higher through the morning, flattened out in the early afternoon and then began to rise as investors digested the minutes from the Sept. 18 Fed meeting, released at around 2:00 p.m. ET.

"The market had a desire to keep going up and there was nothing in the minutes to prevent it," said Paul Mendelsohn, president and chief investment officer at Windham Financial Services.

Mendelsohn said that investors were a little cautious leading into the minutes but once they saw that there was nothing particularly surprising in the minutes, they redoubled their efforts to move stocks higher.

The Dow and S&P 500 carving out fresh all-time highs will give the stock market more ammunition in the short term, he said, provided that the earnings don't derail the momentum.

Investors already know that third-quarter earnings growth will be at the slowest pace in more than five years. But outside of the financial and homebuilding sectors, there may be expectations for results to beat, particularly in the case of multi-national companies that should benefit from the weak dollar, Mendelsohn said.

The period is called the "Bush Boom", the greatest economic story ever told if you ask Sean Hannity or Larry Kudlow. (You know, despite Bill Clinton taking the Dow from 3,500 to 10,500 during the course of his Presidency, tripling its value.)

Today, one year later after the Bush Boom, we have the Bush Kaboom. Today, October 9, 2008, the Dow closed at 8579.19...a loss of 39.4% in one year.

In the five years of the Bush Boom, the Dow gained 6878 points.

In the year since, we've given 5585 of those points back.

By January 20, 2009 I'm betting 7286.27 would be a really great level for the Dow to be at. I'm convinced we may be looking at Bush ending where Bill Clinton started on January 20, 1993...

3241.95.

We've lost over 2500 points in just 9 trading days...37% of the Bush Boom has vanished in the space of two weeks. We'd set a new low in Bushonomics sometime next week.

At that pace the Dow is gone well before January. Hell, it doesn't even make it to December.

The credit markets are still clogged. The housing market is still in freefall. The derivatives are still crushing the lifeblood out of companies. The cardiac arrest is now global.

The Great Reset Button has been hit. Things are accelerating now at a pace that even my wildest nightmares couldn't birth.

Tomorrow's G7 meeting is the last stand of the Alamo. Whatever comes out of this meeting is the world's last bullet in the gun.

This weekend's G7 finance ministers meeting will focus discussion on the current market turmoil as 'global phenomena,' Treasury Undersecretary for International Affairs David McCormick said today.

'We are all affected by it, and strengthened international collaboration is needed now more than ever to find collective solutions to achieve stable and efficient financial markets and restore the health of the world economy,' McCormick said today in a pre-meeting press conference.

McCormick noted that he and Treasury Secretary Henry Paulson have been in regular contact with the G7 and other international counterparts, but Friday's meeting 'will provide us with a timely opportunity to further strengthen our collaboration.'

The Undersecretary said that the US will not seek a 'one size fits all' global approach dealing with the current economic crisis, but would instead favor a framework in how to address economic strengthening. McCormick said that inflation is something the finance ministers will be 'mindful of' in their discussions this weekend, but is unlikely to be the focus as it was in their last meeting.

Don't fool yourselves. Inflation is very much on the minds of these ministers. They are wondering just how much hyperinflation it will take to "save" the global economy. That's the last magic bullet.

And should that magic bullet fail, as every other bullet has failed, then we get front row seats to the end. Even if it succeeds...we still get front row seats to the end.

The end is the final Bush/Cheney October Surprise. What does it entail? Who knows? My nightmares aren't talking much these days...they're too busy watching their 401(k)s become 911(doa)s. But any way you slice it the GOP is across the board dead. All the power Bush and Cheney have taken for themselves will be given to Barry and Joe in a matter of months.

Or at least, that's the plan on paper. The reality...well the last 3 weeks shows that reality can hit a snag every now and then.

Given what this President and Vice President have done in the last 8 years, do you honestly think they will sit back and allow John McSame to lose this election?

Do you think there will even BE an election? I'm not sure we won't be under martial law by then.

The next 3 weeks is the end of one story.

Who will write the next one? I don't know. I don't think it will be Obama, but I have hope.

But whatever that story will be, it will be a horror tale that will make your soul curdle and your blood boil. Whoever gets to write it, the poor miserable schmucks in the tale will be us. We will be hurting. The only question is how long and how deep it will be...a two or three year vicious recession and a lesson learned, a generation humbled...or a ten-year global depression and the resource wars that will come with it...or something in between. I don't know.

But be prepared. This time, I mean it. Be prepared...for anything. We're in uncharted parts of the map, folks. Tectonic plates are moving in our history. The new order that emerges from this will not be the same as what we have lived with so far. America will be radically different...and soon. Those standing near the edges will get smashed.

A wise man knows that the Chinese symbol for crisis contains the symbol for opportunity.

An even wiser man once said that "any man who can hitch the length and breadth of the galaxy, rough it, slum it, struggle against terrible odds, win through, and still knows where his towel is is clearly a man to be reckoned with."

Be prepared. Have a towel on hand. Things will get messy shortly.

Kaboom!

Cross-posted at the Frog Pond.

The Wingnut Obsession With Patrick Swayze

Behold the glory that is Jonah Goldberg on Red Dawn.

My old friend Dave Plotz's piece on Red Dawn (Kathryn linked below) is close to a parody of the sort of liberal moral equivalence that made so many liberals useless in the late stages of the Cold War. He writes:

But what's most unsettling about Red Dawn today is not its infatuation with the warrior death cult. It's that the movie's historical parallels have been turned upside down. In 1984, the Soviets of Red Dawn represented, well, the Soviets, and the Wolverines represented both the Americans and also the plucky Afghan mujahideen then defeating the Red Army in a guerilla war. But on re-viewing, Red Dawn isn't a stark reminder of Cold War fears. Rather, it's a pretty good movie about Iraq, with the United States in the role of the Soviets and the insurgents in the role of the Wolverines.

I'm not going to go point by point through the whole thing. But what's striking about David's analysis isn't merely the out-of-date moral equivalence better suited for The Nation circa 1983, but it's even more recent dated moral equivalence argument as well. Plotz's thesis would have made some cultural or political sense — no matter how much I disagreed with it — if he wrote it in 2005 before the surge. Now even as retro-rethink journalism it seems like it's missed its moment.

Regardless, the comparison of Iraq to America only works if the pre-invasion Iraq was the peace-loving idyll of Michael Moore's imagination. It wasn't. The analogy also needs America's invasion of Iraq to be motivated by base imperialistic designs. It wasn't.

I will let you judge it on its own merits.

WOLVEREEEEEEEENS!

Vegeta, What Does Your Stock Ticker Show?

..."IT'S UNDER NINE THOUSAAAAAAAAAAAAAAAND!!!"

Stocks tanked Thursday afternoon - with the Dow falling nearly 700 points during the session - as panicked investors dumped stocks across the board.

Bank lending remained tight as nervous institutions continued to hoard cash. Treasury prices fell, raising their corresponding yields. The dollar gained versus the euro and the yen. Oil and gold prices fell.

According to early tallies, the Dow Jones industrial average (INDU) lost 679 points, or 7.3%, after hitting its lowest point since May 27, 2003 during the session.

The Standard & Poor's 500 (SPX) index lost 7.6% after touching its lowest point since May 1, 2003. The Nasdaq composite (COMP) lost 5.5% after hitting its lowest point since July 1, 2003.

A key measure of investor fear hit an all-time high: The CBOE Volatility (VIX) index, or the VIX, topped 61.

After seesawing through the morning, stocks turned lower in the afternoon, extending the recent slide. As of 3:35 p.m. ET, the Dow has lost more than 1,900 points over the past seven trading sessions amid growing skepticism that the financial markets can be stabilized.

One year ago today, the Dow hit an all time high of 14,164.53 and the "Bush Boom" was the "most under-reported success story in the modern age."

Well look how far the Bush Boom has brought us...33% straight down.

One Good Thing About The Financial Crisis

...it may do what Washington politicians refused to do: cut defense spending.

In the fiscal year that just ended, the U.S. spent $694.2 billion on defense, up 52 percent from the 2000 defense budget in constant dollars. (That year, the department spent $292 billion.) The fiscal 2008 total includes $514.2 billion in the defense budget and another $180 billion to pay for the wars in Iraq and Afghanistan, which have been financed through so-called "supplemental" budgets.

Eight years of borrowing to pay for the Iraq and Afghan wars, coupled with an aging baby boomer population, growing health care costs and a push to enlarge the Army, could force legislators to make tough decisions about which needs should take priority, and the next president to reassess how much the military can do.

Congress' decision earlier this month to approve a $700 billon bailout for the financial industry adds to the strain on the federal budget, and the stock market decline and the credit crunch could slow economic activity and eliminate jobs, which in turn could reduce tax revenues.

"How the U.S. government funds its military answers the question of: How committed it is to fighting these kinds of war?" said James Quinlivan, a senior military analyst and mathematician at the RAND Corporation.

The pressure is likely to be felt most acutely by the Army, the military's largest and most expensive branch, which is already strained by the war in Iraq and planning for another decade of sustained conflict. Both presidential candidates have called for more troops in Afghanistan while maintaining a substantial force in Iraq.

The Army plans to add about 30,000 soldiers by 2010, and expanding the force to 547,000 would cost at least $5 billion, according to Army estimates. Some internal estimates put the cost of repairing or replacing worn-out and damaged equipment and procuring new technology at another $150 billion a year.

Cuts will have to be made, period. To fund what either McSame or Obama want to accomplish, drastic cuts will have to be made.

Either the promises go or the guns and bombs do.

Throwing More Money At The Problem

Hank Paulson's next plan? Use the UberBailout to directly recapitalize banks.

The U.S. Treasury Department plans to start directly injecting capital in U.S. banks as soon as the end of October in exchange for passive investment stakes, according to a financial policy source familiar with Treasury Secretary Henry Paulson's thinking.

Using authority granted to it by last week's $700 billion market rescue legislation, Treasury would get common or preferred shares in the banks it capitalizes, the source told Reuters on Thursday. The government does not intend to seek seats on companies' board of directors in the voluntary capitalization program.

White House spokeswoman Dana Perino said later on Thursday that Paulson is "actively considering" capital injections into troubled U.S. banks.

"Secretary Paulson is looking at all the different tools to figure out which ones should be used at what time and how robustly and how much money to put into each," she said.

A Treasury spokesperson declined to comment in detail but said: "Treasury has broad, flexible authorities under the financial rescue legislation to buy assets, provide guarantees and inject capital and intends to consider all of them."

If the U.S. Treasury does inject capital into banks, it would be following the playbook of the British government, which on Wednesday pledged up to $87 billion to shore up banks' capital in exchange for preference shares.

The source familiar with Paulson's thinking said Treasury was working "extremely fast" to put together a capital injection plan.

This plan is basically the nationalization of the bad players in the financial sector. It's come to this. The government will end up owning shares of banks. In some cases these may be majority shares of banks, giving the government de facto ownership of banks to keep them alive long enough to be properly disposed of. The slow death of America's financial sector is at hand. Paulson is seeking an orderly death, not a chaotic one that takes down other sectors of the economy with it.

As it is, he may be too late.

Keep in mind the end of the month is a mere days before the election, too. Political implications will keep the bulk of this until after November 4th, then the undertakers will be called in to cart off hundreds if not thousands of banks to their eventual resting place over the next several months and years.

It will be the next President's problem.