Or as Chris says - simply print more money to replace what has been wiped out.

You can't be me, I'm taken

is still the most likely end game, as billmon predicted recently.

And my prediction is still that the eurozone will weather a dollar crash a lot better than most people say or think.

In the long run, we're all dead. John Maynard Keynes

What's the pessimistic version?

Hey, Grandma Moses started late!

Dave Lindorff: The Bailout Will Kill the Dollar

Eventually, of course, entrepreneurially minded people will begin establishing local farms again where they once flourished generations ago, and small factories will be built to provide key essentials, but all this will take time, and will have to cater to a market of people operating at a much lower standard of living.

The banking sector, meanwhile, which is the proximate cause of this monumental disaster, won't mind any of this, for it will continue operating on the international stage, shifting its focus to lending money (no longer dollars, though), to growing economies in Asia and Latin America and eastern Europe. And this is what, in truth, the "rescue" of Wall Street is all about.

It's not about saving Main Street, as Paulson claims. Main Street, under the bailout, is toast. It's about helping the banks and investment banks and insurance companies that brought on this crisis to ride it out in style, their astronomical losses bankrolled or absorbed by the American public, so that they can shift their operations overseas and continue with their rape and pillage of the global economy.

"Two wrongs don't make a right, but three lefts do." Jim Hightower

A pretty influential book in the late 80s or early 90s described the French, German and Nordic models as the "Rhenan Capitalism", with a strong mixture of public and private in the economy, and stronger social nets.

I need to dig it up, but it basically said that the model was sound and a coherent alternative to the more free-wheeling anglo capitalism (which was not presented as evil, but certainly as significantly different).

In the long run, we're all dead. John Maynard Keynes

So are we left with the Gallic, Nordic and German social market economy models - three close variants - or the potential for the emergence (wishful thinking) of a new model based on Open Society?

We are also left with plain old fascism. Something the power classes might try to resort to if a whole truckload of manure hits the fan.

By the way, and about Europe decoupling, I've found this on RGE today:

Daniel Gros/Stefano Micossi: The "overall leverage ratio" - a measure of total assets to shareholder equity - of the average European bank is 35 due to large in-house investment banking operations, compared with less than 20 for the largest U.S. banks. This means that relatively small writedowns on their assets could have a devastating impact on a bank's capital--> some EU banks have become too big for any one European country to save while an official cross-border crisis management mechanism with ex ante burden sharing is not in place.

I am not an economist, but it seems pretty grim to me...

"Nullius in Verba"

Sven Triloqvist:

remove all secrets from society, including business and security

Possibly the single easiest st way to create a fair economy would be to make all bank transactions public. Eliminate secrecy, 'discretion', off-shoring, and all of the other con tricks which keep real value out of the real economy.

You could instantly see what your colleagues were earning, and how much they were in debt. Back-handers would become harder to hide.

You'd get an interesting barter-based black economy, but if all banked transactions were visible even that would be hard to hide completely.

You can't change things overnight. Whatever happens, I'd like to see the current system replaced. But you can't destroy THIS system and install a new one instantly--unless you don't mind hundreds of millions dying.

So, bail them out, but the debts at a premium, hope the derivatives come up to par and become worthless.

Then, you raise taxes skyhigh and devise a new system.

This will happen again of course, such is the nature of capitalism. But, the more you regulate and control, the less incentive you give to the rapacious immoralists.

So, my plan:

1. Bailout
   
2. Raise Taxes
   
3. Regulate

But so many people do understand it: why, solid opinions on it all are all over the blogs. </snark>

I'm trying to get a sense for the range of possibilities really.

[Pierre's Crystal Ball of Doom™ Technology]

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

Great analysis, Pierre.

That is how it will probably be in the absence of Something Completely Different: which I actually believe that there could be....

Modern conservatives engage in one of man's oldest exercises in moral philosophy: the search for a superior moral justification for selfishness.Galbraith

Have you factored in the fact that in the short term quite a lot of oil will have to either stay in the ground or go to the US whether they can pay for it or not? Not all crudes are created equal, and the US has refining capacity for some of it that others lack.

Similar situations are undoubtedly going to crop up if you analyse other strategic industries - after all, one of the characteristic features of strategic industries is that they involve actual infrastructure that can't be juggled around as rapidly as financial instruments (and hence is boring and sclerotic and so on and so forth).

So if there is a major seize-up in trade, I'd expect the rest of the world to be hit harder than you seem to imply, and the US to be hit less hard.

OTOH, I don't see why foreign trade would have to screech to a complete halt. Sure, if people don't trust your currency, you can't run a trade deficit, but what prevents you from running a neutral or surplus foreign trade? The former only requires functioning infrastructure (which is a requirement for trading at all anyway), while the latter requires only functioning infrastructure and that there exists a trusted currency somewhere. Doesn't have to be your own.

- Jake

"Terraforming your own planet to make it uninhabitable hardly counts as epic win." - ThatBritGuy

Excellent!

You can't be me, I'm taken

Nothing much is likely to happen until Obama and the next Senate take office in January. Obama may pull a Roosevelt on the banking system.

So is it good that the crisis has really not come to a head till so late in the Bush presidency, so that him and his cronies havent really had to deal with it? this being as I understand it the last reporting period before the election, if it had happened six weeks further on then it could be sold as response to the election of Obama, if six weeks forward then Bush might have tried for real to fix it, and who knows where that would have lead.

If you're not part of the solution, you're part of the precipitate.

Obama may pull a Roosevelt on the banking system.

Meaning?

I hope Obama's intelligent enough to realize he's going to have to pull a Roosevelt on a lot more than just the banking system if he's elected.

The good news is that this has hit on Bush's watch, so it won't be blamed on Obama (even though the Reps will undoubtedly try to blame Dems, it's a losing argument).

Congress is not going to get anything done this late in an election year, especially not with a debate up tonight and McCain acting like he's been taking acid or something.

Be nice to America. Or we'll bring democracy to your country.

I've put up a diary on dKos about the idea of a Natioanl Investment Bank

In the long run, we're all dead. John Maynard Keynes

Interesting anecdotal evidence, papicek.

Maybe the Boston area's a bit of a clone for one or two of the European countries less affected by the gathering storm so far.

But I think the US also has Main Street analogies for UK, Spain and so on, where the situation is maybe not so relatively unaffected as it is, say, in France.

Modern conservatives engage in one of man's oldest exercises in moral philosophy: the search for a superior moral justification for selfishness.Galbraith

Average sale is down about 7%, but overall, sales are down from plan only 3%. I'm talking small ticket sales, not homes, cars or major appliances requiring financing.

Maybe because credit CARDS crunch did not happened yet...
There are areas I suppose where house prices are steady and may even still rise ...that's where people still borrow on equities. A hell lot of the people still finance their "way of life" through credit cards, new mortgages on equities, and other loans. This is money that does not exist. Printing money (one way or another) will definitely leave us with inflation. If not controlled from the beginning inflation tends to skyrocket...
Reading your predictions (especially long term ones) gives me shivers in my spine. I lived for 53 years and have seen and endured a lot. Even if I lose everything I learned how to survive...but what about our children? What a shity world and life they are going to inherit...

Welcome back to ET geonomist.

As you will see from my comment here

Who will Hear Us

your previous intervention is not forgotten.

And you will have seen my recent post on the

Land Cafe thread as well, no doubt.

My take is a new approach to direct "Peer to Peer" investment in land rental units will make mortgages obsolete, and give rise towaht is to all intents and purposes a "unitisation" "Land-based" currency, as opposed to (say) John Law's 1705 "land-backed securitisation" currency proposal.

Modern conservatives engage in one of man's oldest exercises in moral philosophy: the search for a superior moral justification for selfishness.Galbraith

I like this story, and it might just happen. Best case, as I see it, but there's a lot of talent working on this right now.
It's easy to forget just how sharp- and gutsy- Dodd and Biden were during the Reagan administration- they came close to wringing the old bastard's lying neck over the Iran-Contra debacle, and with damned little support. And Barney frank is still a force to be reckoned with. But they're all getting old-- fingers crossed.

I think the big risk to this rather benign outcome is, as we discussed above, the junkyard dog of the authoritarian-evangelical weapon crafted by the right to aid them in their agenda. It's slipping it's leash.

Grabbing what you can, as John Ruskin said, isn't any less wicked when you grab it with the power of your brains than with the power of your fists.

It seems that we also need different levels of currency for example a separate international currency for trading in world based commodities like oil and CO2.  

The rent so collected could be used for international projects or rebated back to individuals across the globe.  All of us heavy CO2 users would have to compensate the injured.  It might change some behaviors....

As the guy said... "If you want to keep a donkey healthy, you don't regulate what comes out of it: you regulate what goes in."

Oil has the intrinsic value of carbon energy and may therefore easily be "monetised" by creating Units redeemable in energy: CO2 has no intrinsic value whatever, and can only be monetised by "fiat".

But you must burn Carbon to get CO2.

My proposal is that a Carbon levy (tax on privilege) would be used to create a Carbon "Energy Pool".

Stage One:

"Unitise" the pool into - say - 10 Kilo Watt Hour Units, which may be termed "Carbon Dollars".

So at a "launch" market price of US$0.10 per kwH, a Carbon Dollar "Unit" would actually equate to US $1.00. The US $ would thereafter diverge from (ie in all likelihood devalue against) Carbon dollars

Stage Two

Let's start with a Pool of 100m Carbon Dollars valued at $100m.

Invest the $ funds in the Pool in:

(a) "MegaWatts" from renewable energy projects - on the basis that this energy investment is repaid by production of the project "sold forward" to the Pool;

(b) "NegaWatts" from energy efficiency savings, on the basis that the energy investment in Carbon Dollar terms is repaid out of energy savings.

So a 1 Mw wind turbine which costs $2m is funded by selling forward 2m Units (Carbon Dollars) at $1.00 each.  ie 20,000 Mega Watt Hours, or 20,000 hours of production, which over a 20 year life is 1000 hours per year.

It then depends how many hours per year the turbine produces electricity (after putting operating costs to one side) as to how quickly this investment will be paid back to the Pool.

The balance of production then remains for distribution as an Energy Dividend.

For energy saving investments in "NegaWatts", the propert(ies) where the savings have been made could be billed by the Pool for repayment of x Energy Units/ Carbon Dollars per year at the prevailing exchange rate of Carbon Dollars/ Energy Units in US $.

Stage Three
Distribute equitably the 100 million Carbon Dollars/ redeemable Units in the Pool.

Recipients could: pay off "Energy Loans"; use the Carbon Dollars against energy consumed; or more likely exchange them for something else of value at a "market price".

In all likelihood, a large proportion of Carbon Dollars would remain outstanding, and the Pool would therefore be able to benefit from "seigniorage".

As with any other monetary system, the Pool would have to be managed to prevent inflation or defaults, but its basis will be in energy - which has intrinsic value - distinguishing it from US $, or Carbon Credits, which have no intrinsic value.

Modern conservatives engage in one of man's oldest exercises in moral philosophy: the search for a superior moral justification for selfishness.Galbraith