The Republicans Have No Idea How To Handle McSame

They do know he is going to lose. They don't know how to help him, because there is simply no getting past the fact that Americans blame the GOP for the economy, and John McSame is the GOP candidate.

Again and again, party leaders said in interviews that while they still believed that Mr. McCain could win over voters in the next 30 days, they were concerned that he and his advisers seemed to be adrift in dealing with an extraordinarily challenging political battleground and a crisis on Wall Street.

The expressions of concern came after a particularly difficult week for Mr. McCain. On Friday night, new questions arose about his choice of Ms. Palin as his running mate after an investigation by the Alaska Legislature concluded that she had abused her power in trying to orchestrate the firing of her former brother-in-law, a state trooper.

“I think you’re seeing a turning point,” said Saul Anuzis, the Republican chairman in Michigan, where Mr. McCain has decided to stop campaigning. “You’re starting to feel real frustration because we are running out of time. Our message, the campaign’s message, isn’t connecting.”

30 day thing aside when there's 23 days left, the problem is the GOP just doesn't understand why the Rovian tactics aren't working. They really don't see why any thinking American would vote Democratic this year, much less for a black man. They don't understand because comprehension is simply beyond their grasp. You and I know that any "message" the GOP is trying to get across is drowned out by the 800-pound gorilla in the room with the airhorn and the neon sign that reads "THE BUSH REPUBLICANS CREATED THIS FINANCIAL MELTDOWN!" They honestly believe that since the media and America has given the Bush Republicans a pass on every other cock-up they've rammed down out throats, that this one should be no different.

Only it turns out this one is the last straw, because it's going to put millions of us out of work with no way to feed our kids. And that's making people stop and think about who should be in charge this year. The answer they are arriving at is "not John McSame."

But no subject has more divided Republicans than the one that has been a matter of disagreement in the McCain camp: how directly to invoke Mr. Obama’s connection to his controversial former minister, the Rev. Jeremiah A. Wright Jr., and William Ayers, a former member of the Weather Underground who has had a passing association with Mr. Obama over the years.

In Colorado, a traditionally Republican state that Mr. McCain is struggling to keep in his column, the party chairman, Dick Wadhams, urged Mr. McCain to hit the issue hard, arguing that it was fair game and could be highly effective in raising questions about Mr. Obama in the final weeks of the campaign. He said he was surprised Mr. McCain had failed to do so in the debate last week.

“I think those are legitimate insights into who Senator Obama is,” Mr. Wadhams said. “I do not think it is irrelevant to this election.”

But Fergus Cullen, the Republican chairman in New Hampshire, said Saturday that he thought it would be a mistake for Mr. McCain to go down that road, warning that it would turn off moderate voters in his state who have a history of supporting Mr. McCain.

“I don’t think he should be giving into elements of the base who have been asking him to be going after, using Wright, using Ayers,” Mr. Cullen said. “Think about it as an undecided persuadable voter.”

Who the fuck cares about Jeremiah Wright AT ALL when you just lost your job, your health insurance, your pension, or your 401(k)? Who cares about Tony Rezko or the color of Obama's skin when you don't know if you can feed your kids or make your mortgage payment or car payment or credit card payment this month because you've been letting them slide and the collectors are calling daily?

Look folks, when people are losing trillions of dollars, their life savings, are going into indentured servitude and are watching AIG executives get spa treatments on the taxpayer dime, and your CHIEF CONCERN about yout party's candidate for President is "how negative John McSame should be when attacking on the Wright/Ayers angle" your party deserves to lose every election it's in.

The people are going to bury the Politics of Stupid for good. The GOP has nothing now. Nothing. Absolutely nothing. This mass repudiation will put them in the wilderness for years. John McSame will go down as the GOP's McGovern.

If we come out of this with a country instead of a live-action version of Jericho then we're ahead of the game as far as I'm concerned. The Democrats are still infinitely preferable to the GOP.

Forget Universal Health Care

...it's not going to happen. It will be all the next President can do just to keep basic order and combat a breakdown in services like food, water, and power. The bailout's impacts are immediate and devastating on our economy with news that the 2009 fiscal deficit could be upwards of two trillion dollars.

The global financial crisis is turning into a bigger drain on the U.S. federal budget than experts estimated two weeks ago, ballooning the deficit toward $2 trillion.

Bailouts of American International Group, Fannie Mae and Freddie Mac likely will be more expensive than expected. States are turning to Washington for fiscal help. The Federal Reserve said this week it will begin buying commercial paper, the short- term loans companies used to conduct day-to-day business, further increasing costs. And analysts now say the $700 billion bank- rescue plan passed by Congress last week may have to be significantly larger.

``I always assumed they would be asking for more money along the way if it was necessary, and it looks like it's going to be necessary,'' said Stan Collender, a former analyst for the House and Senate budget committees, now at Qorvis Communications in Washington. ``At the moment, there's nothing happening here that's positive for the budget. Nothing.''

The 2009 budget deficit could be close to $2 trillion, or 12.5 percent of gross domestic product, more than twice the record of 6 percent set in 1983, according to David Greenlaw, Morgan Stanley's chief economist. Two weeks ago, budget analysts said the measures might push deficit to as much as $1.5 trillion.

Forget about Obama's spending proposals, including his tax cuts on the middle class...not going to happen. None of it.

We'll be lucky to survive the riots, shortages, and mass unemployment ahead.

One Person's Pro-Choice Position

...is another person's radical insanity, or so the story goes.

Sarah Palin would have you believe that her position on abortion -- "I am pro-life. With the exception of a doctor's determination that the mother's life would end if the pregnancy continued," is the mainstream position on the topic, and Obama's position -- that he will "will make safeguarding women's rights under Roe v. Wade a priority" is just too radical for America.

Alaska Gov. Sarah Palin charged into the culture wars Saturday in Pennsylvania, painting Sen. Barack Obama as a radical on abortion rights.

The stop comes amid news that Palin violated Alaska ethics law by trying to get her former brother-in-law fired from the state police, a state investigator's report for the bipartisan Legislative Council concluded Friday.

Ethics woes aside, Palin focused her attention on abortion -- an issue that rallies the conservative base but some say alienates independent and women voters.

"In times like these with wars and financial crisis, I know that it may be easy to forget even as deep and abiding a concern as the right to life, and it seems that our opponent kind of hopes you will forget that," Palin told a crowd in Johnstown. "He hopes that you won't notice how radical, absolutely radical his idea is on this, and his record is, until it's too late."

It's amazing. The Sarah Palin position on abortion, one shared by plenty of folks in the GOP, is that new Supreme Court justices with specific views on this issue as a political agenda must be installed, that Roe v. Wade must be overturned by these justices, and that state legislatures must then be given the ability allow an up or down vote on banning all abortion procedures under the cover that Roe v. Wade is in fact the denial of the the American people's right to vote in legislators at the state level who will work to pass such legislation, or to vote on such legislation directly in referendums.

So you see, being pro-life in this case with the stated goal of having state legislators and millions of other people decide what is best for a woman's body is actually being pro-choice, because these folks believe that an entire populace has the right to make these choices for you, and Roe v. Wade's pesky "Constitutional right to privacy" argument is keeping American voters and state legislatures from being able to mandate personal decisions involving your body.

Why stop at abortion? If you remove the tenets of Roe v. Wade's arguments, that a voting populace's rights to decide on social mores involving reproduction is more important than the individual's right to make their own decisions on the topic, then you have to apply that logic to allowing the people to vote on birth control, pre-marital sex, in-vitro fertilization and fertility clinic procedures, and even the legality of sex itself as something that has to be voted on.

You see, if Roe v. Wade's arguments are thrown out, if there is no Constitutional right to individual privacy, then the voters and the State then have the right to make a person's life decisions for them, anything less is denial of the voter's rights to express their beliefs in enforcing the moral codes that they wish to see their society have.

Forget the "slippery slope" argument, this is the "Palin's cliff" argument. You are a ward of the state, plain and simple, and these people believe that whether or not you can do anything as a private individual should be determined solely by a vote of the people, anything less is to deny the people the right to vote on your effects on society.

Why stop at the legality of sex at all? Why not allow the people to vote directly on or vote in people who wish to legislate anything that could be a social taboo: homosexuality, religion, interracial marriage, the ethnic composition of neighborhoods, what languages you are allowed to speak, who you can associate with, who is a citizen...the list goes on and on.

But that position is not "radical." No, Senator Obama's position that an individual has rights in our society is "too radical" for America according to Sarah Palin.

Think about that. This is the kind of decision Sarah Palin would make for you as President. After all, you voted her into the office. She therefore believes she has a mandate to make the decision to allow people to make the decisions for you...people like Sarah Palin. Morality must be voted upon and legislated.

She's the ultimate pro-choicer, you see.

Cross-posted at the Frog Pond.

The Price Of Failure

The G7 meeting this weekend has been a complete bust. Germany and France are scrambling to save themselves, and the IMF is now publicly warning of global systemic meltdown.

The IMF warned on Saturday that the global financial system was on the brink of meltdown, while France and Germany pushed ahead with a pan-European crisis response to try to prevent the worst global downturn in decades.

At a joint news conference, French President Nicolas Sarkozy and German Chancellor Angela Merkel said they had "prepared a certain number of decisions" to present at a Sunday meeting of European leaders as they work feverishly to restore blocked credit markets to working order.

The United States appealed for patience, but the International Monetary Fund stressed that time was running short after leading industrialized nations failed to agree on concrete measures to end the crisis at a meeting on Friday.

"Intensifying solvency concerns about a number of the largest U.S.-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown," IMF chief Dominique Strauss-Kahn said.

It's the last hurrah and the world is burning.

I expect by the time the G7 decides to act in concert after another 20% loss worldwide in stocks, maybe something will happen that will prompt the kind of international action needed. It won't matter much by then I'm thinking, but hey. I'm sure it'll be okay, right?

Delusions Of Only Being Moderately Horrible

You really do have to admire the sheer ability of Preznitman to deny reality to the point where he honestly believes he did us a favor these last eight years.

George W. Bush began his presidency with the worst terrorist attack on American soil and he is ending it with the worst financial crisis since the Great Depression. In between, he confronted a hurricane that nearly wiped New Orleans off the map as his administration showed ineptitude in its response.

Now, as he spends his last months in office trying to avert a global economic collapse, Mr. Bush has been telling people privately that it’s a good thing he’s in charge.

Are you shittin' me? This man is the worst President in the history of the country, and he's actually believing we're grateful for the last eight years to him.

“He said that if it was going to happen at all, he was glad it was happening under his presidency, because he had a good group of people in D.C. working for him,” Dru Van Steenberg, one of several small-business owners who met with Mr. Bush in San Antonio earlier this week. The president expressed the same sentiment, others said, during a similar private session in Chantilly, Va., the next day.

“He said that whoever was going to take over in January was going to have a huge crisis on their hands the day they come into office,” Ms. Van Steenberg added. “He thought by this happening now, that perhaps everyone could see signs of improvement before the next president comes into office.”

Insanity. Pure insanity. Bush really does believe history will see him as some sort of saint with a dirty halo, a man who led the country through the "rough shoals of fate" ala Gerald Ford or something, and that he will be absolved by historians decades from now as a visionary or great unifying statesman.

Our President is an insane lunatic suffering from nearly sociopathic levels of delusion. His complete lack of leadership and his blatant refusal to act on some of American history's most turbulent events has directly contributed to the state we're in right now: facing a global catastrophe.

He will be reviled by a generation who will teach their own children to revile him as well. He deserves no less. He should actually appear on the currency of this country in the future with the caption "Never Again."

Never Again. Two words that we must all take to heart now, for it is truly too late. Our standard of living will drop precipitously soon. With clear eyes, sharp mind, and a heavy heart, we must find a way out together now.

I fear it will be a brutally long journey.

George W. Hoover

Preznitman spoke this morning from the Rose Garden, flanked by the G-7 finance ministers. His statement? "We'll fix this! You can count on us!"

President Bush on Saturday once again tried to reassure a nervous public that world leaders were working together to address what is unfolding as the worst global financial crisis since the Great Depression.

"We recognize that the turmoil in the financial markets is affecting all our citizens," Bush said, standing in front of financial ministers from the world's top economies gathering in the nation's capital. "All of us recognize this is a serious global crisis that requires a serious global response for the good of our people."

The president did not announce any new actions to stem the financial panic gripping the world, but reiterated measures world leaders are taking to strengthen financial systems.

Those measures will not take effect in time, and by the time they do take effect, they will be too late to do any good. The newest pointless rule proposal by the SEC? A three day ban on a short selling for any stock that drops by 20% in a day. That's like passing a leaf burning ban ordinance two weeks after a wildfire has burned down city hall.

All signs are pointing straight down. Even Jim "Mad Money" Cramer is talking about the honest preparations for 1929 all over again. Six weeks ago of course Cramer said that the "rally is real" and that the WSJ's crazy article that said stock markets wouldn't recover until next year was "totally overblown" negativity. Now, Cramer is actually right about the same percentage of the time as a broken grandfather clock is at telling the time, but the damage is still done and more damage is coming as a result: the systemic, structural basis of the global economy is collapsing.

Idiots. All of them. I've been warning about this for nine months now. People a lot better at this then I am have been warning about this for several years now and some before that have been warning us since 2000 or so that our economy was untenable. Before Roubini there was Libertarian economist Gary North, who said this in 2002:

This is the threat the world faces today. Central banks are in control of money. They have addicted the whole world to massive debt, ever more complex. Any slowdown in the inflation of the money supply threatens the solvency of the entire economy. Ludwig von Mises warned against this ninety years ago, in his Theory of Money and Credit (1912). He warned that the government's refusal to call a halt to monetary inflation – its return to credit-money creation – would eventually destroy the currency. He called this the crack-up boom. In the meantime, we would get endless boom-bust cycles, he said. So we have.

Let me repeat the journalist's warning about buying shares of bankrupt firms: "Gambling involves much hope, little thought and leaves you with the irrepressible urge to repeat your mistakes." But what happens when bad accounting practices, complex debt, and endless monetary expansion persuade investors to buy what are in effect bankrupt companies – companies that are kept afloat only by new injections of bank credit money? The central bankers dare not stop the flow of money. And so the leverage game goes on and on. We are riding the tiger, a tiger of endless debt and capitalized future income streams: derivatives.

And as Gary North pointed out, Austrian Economist Ludwig von Mises warned the world of the problems of central banks and debt long before the Great Depression. He was ignored then. He was ignored for a very long time by most folks.

I honestly thought somebody was going to heed those warnings that had the power to DO something about it. Me, I just made the choice to not get a credit card...still the best choice I made in my life so far.

But it's all coming down around us now. The warnings were not heeded. The perfect storm of willful ignorance, greed, neglect, deregulation, credit addiction and global scale has turned this month into the end of an era.

George W. Hoover, the worst Preznitman the world has ever seen.

Two More Banks Died Friday, Many More Coming

...bringing the total number of bank failures in the US this year to fifteen.

Meridian Bank of Eldred, Illinois, with $39 million in assets and $37 million in deposits, was shut by the state yesterday and National Bank of Hillsboro, Illinois, bought the deposits from the Federal Deposit Insurance Corp. Four branches in southern and western Illinois reopen today, a fifth opens Oct. 14, the FDIC said in a statement.

Main Street Bank of Northville, Michigan, with $98 million in assets and $86 million in deposits, was turned over to the FDIC yesterday. Monroe Bank & Trust of Monroe, Michigan, bought the deposits and today will open its two offices near Detroit as branches.

``The dramatic downturn in the residential real estate market unfortunately knocked the wind'' out of Main Street, Ken Ross, commissioner of Michigan's Office of Financial and Insurance Regulation, said in a statement.

Regulators have now closed the most banks in 15 years, and the collapses of Washington Mutual Inc. and IndyMac Bancorp Inc. were among the biggest in history. The housing slump and tight credit led to enactment of a $700 billion bank rescue plan, and triggered a bankruptcy by Lehman Brothers Holdings Inc. and nationalization of Fannie Mae and Freddie Mac.

These banks won't be the last, either. The number of bank failures during the Great Depression didn't really ramp up until late 1930 into 1931...more than a year after the Stock Market Crash of October 1929. Granted, things move faster these days, but the majority of the bank failures that caused the Depression happened after the Crash, particularly after the US failed to stop the loss in confidence in bank deposits, causing bank runs across the country.

Sound familiar? It should. It's the same problem we have now only much worse: it's Global No-Confidence these days. Hammerin' Hank Paulson's plan to purchase bank stocks isn't going to solve the credit market problem of illiquid assets causing insolvency. If anything, the reverse will happen: since the banks will have to create new shares for the government to buy, the value of existing shares could get diluted and lose value sharply...completely negating the additional capitalization that purchasing banks shares is supposed to bring. After all, if you know the government is stepping in to prop up a financial stock YOU have in YOUR portfolio, aren't you going to want to get out of that stock considering the government's efforts have so far failed miserably across the board?

Example: Bank XYZ has 30 million share oustanding at $12, for a total worth of $360 million. The Government steps in and creates 10 million shares at that $12, giving the bank an extra $120 million in asset value, for a total of $480 million. Looks good on paper except for the fact that people are going to be selling XYZ stock like crazy if the US Government needs to step in to save that bank!

So the share price of Bank XYZ drops like a rock to $9 a share. It now has 40 million shares outstanding...worth $9 a piece for a total of $360 million...exactly what it had before. If the share price dropped to $6 instead, the bank would now be only worth $240 million, having actually lost money on the scheme! Only now the government owns 25% of the bank that still needs more capital injected into it...so the Government buys MORE SHARES...

And the death spiral continues. The plan's not going to work. The credit crisis is a short-term disaster coming in a matter of weeks, but the confidence problem is instant-term right now. No confidence indeed. Unprecedented global action from the G7 is needed NOW or the game ends next week.

But the G7 plan looks like it's going to be worthless.

The world's rich nations vowed on Friday to take all necessary steps to unfreeze credit markets and ensure banks can raise money but they offered no collective course of action to avert a deep global recession.

In a surprisingly brief statement following a 3-1/2 hour meeting, the Group of Seven stopped short of backing a British plan to guarantee lending between banks, something many on Wall Street saw as a vital step to end 14 months of turmoil and growing panic on financial markets.

"The G7 agrees today that the current situation calls for urgent and exceptional action," the United States, Canada, Britain, France, Italy, Germany and Japan said.

Boy, that'll help the markets!

We're at the point in this economy where our choices are everyone pulling up on the control stick at once and making an emergency landing on the freeway with no landing gear, or arguing loudly while the plane smashes nose first into the ground.

We have days, and then hours left before the markets open. Without extraordinary worldwide action, the spectre of global depression hangs over us all. The IMF is warning inaction this weekend could lead to another 20% market fall like we had worldwide this week. I honestly think it could get much worse than that.

Less than 36 hours and counting until the Nikkei opens most likely with another staggering loss and the spiral continues unabated next week, wiping out trillions and trillions. Less than 48 hours until the US stock markets open (bond markets are closed for Columbus Day but not stock markets.)

The Crash of 2008 may just be beginning.

StupidiNews, Weekend Edition

• The Big 3 Automakers could become the Big 2 as GM considers buying Chrysler.
• US Defense Secretary Robert Gates says the US would support peace talks with the Taliban.
• Times are already tough in places like Pitt County, NC.
• A new study shows that cultures that encourage nerdiness have on average, better math nerds.
• Phillies make it 2-0, and the Red Sox get the jump on the Rays.

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.