Timber.

Some mighty trees have fallen this week in the investment world. Lehman Brothers and Merrill Lynch, two of the most recognizable names in the multi-trillion dollar gambling casino we call Wall Street, are now no more. This is a meltdown of epic proportions - something on the scale of what had been predicted in "activist" literature over the past few years. Such a large portion of the world economy rests on a foundation of speculative investment, much of which is driven by impossibly complex financial instruments that effectively obscure the very concept of ownership and liability. The problem was a long time in the making, but it gained considerable steam after Congress voted in 2000 to gut the Glass Steagall act, eliminating the fire wall that existed between commercial and investment banking and essentially deregulating large swaths of the financial services industry. This action made possible the vast market growth of mortgage-backed securities and abstruse devices like credit default swaps that proliferated in the free-for-all atmosphere legislated by the likes of Phil Gramm, former Texas Senator, now a senior economics adviser to the McCain Campaign and quite possibly the next Treasury Secretary.

So now we're on the brink of committing trillions of dollars in taxpayer money to make the whole corrupted mess solvent again. Junior to the rescue! Clearly Wall Street was buoyed by the news - you could practically see them uncorking champagne on the trading floors. What this means for the rest of us, however, is more of what we've seen previously - namely, federal money that should be going into schools and bridges and health care and other public goods will be siphoned off to prop up private enterprises dedicated to enriching a privileged few. It's hard to imagine that neo-liberal privatizers in either major party aren't pleased by this development. This will make public investment in health coverage, infrastructure redevelopment, and even Social Security less likely if not impossible. It represents, after all, a commitment of funds twice as large as the cost (so far) of the Iraq war (which is itself about 500 times and counting as large as the administration had predicted it would cost, so I wouldn't hold them to those numbers). So whoever wins in November, you're likely to hear, "Sorry, folks... we're out of money."

This couldn't have worked out better if they'd planned it. The entire mission of the Bush Administration appears to have been one of crashing the U.S. government and making severe cutbacks on social programs inevitable. Because programs like Social Security and Medicare are popular, there's no other politically feasible way to derail them than to empty the treasury of funds, then shrug and turn your pockets inside-out. Fortunately, Bush's friends in the high-rolling investment community (fellow MBAs, many of them) have seen to it quite nicely. Now we will all underwrite their bad investment decisions, secure their bad loans, and take the hit on the defaults. And if profit is to be made in any of these enterprises, you can be sure that it will not accrue to the benefit of ordinary citizens. This is something like what used to be called "lemon socialism" - essentially privatize the profits and socialize the losses. And you can be sure Bush will be serving it up like lemonade.

Just bear in mind - these Wall Street firms are the same ones that would have managed privatized social security accounts, if Bush and friends had had their way. We don't need that kind of socialism.

luv u,

jp