As Jerome a Paris has noted, among others, Paulson and others of his ilk have started blaming the Chinese and Germans for our economic woes:
The US Treasury Secretary said that in the years leading up to the crisis, super-abundant savings from fast-growing emerging nations such as China and oil exporters - at a time of low inflation and booming trade and capital flows - put downward pressure on yields and risk spreads everywhere.
This, he said, laid the seeds of a global credit bubble that extended far beyond the US sub-prime mortgage market and has now burst with devastating consequences worldwide.
What a sorry load of ... well, let me go for a better analogy than that ... and then dig more deeply into the whys and wherefores of its load of ...
NB. New Oil links are now located at the Midnight Oil Blog
A while ago, as an off-shoot of the Beauty Platform, I set out a Beautiful Bail-Out plan.
Two key parts were: 50:50 on money going to help regular home buyers to extricate themselves from the mortgage meltdown, and on bailing out the finance sector from the mess they got themselves into ...
... and having the finance sector bail out consisting of both unloading dubious assets and issue of Senior Preferred shares with heavy strings attached.
Now, the Administration did not, in fact, listen to me, but when Senator Dodd was complaining about what banks had done with their bail out money, waddya know ... I got a perfect three out of three on what strings needed to be attached to the money:
Limits on Mergers and Acquisition
No payments of any other dividends
Limits on Executive Compensation
... until the Senior Preferred Dividend had been paid for four quarters straight ... and kicking back in if the firm in the future ran into problems meeting the Senior Preferred Dividend.
But ... does the Beautiful Bail Out model extend to the Big Three?
Dollar hegemony, however, can only prevent a general contagion of dollars up to a point. What that point is, however, is a mystery. ... Thus hyperinflation and currency crash.
As I see it, there are two paths ahead.
(1) A crash program of investment in sustainable energy production and energy efficiency in transport, housing and farming, leveraging the exporters-exchange-rate the US$ will be seeing into a central position in the growth industries of the 21st century ... or ...
(2) We try to continue on the same unsustainable course, and have a hyperinflation.
Background, more detail and analysis beyond the fold.
The numbers that are thrown around are so mind-boggling that they are mind-numbing. The total amount of Credit Default Swap (CDS) obligations outstanding, according to the Bank of International Settlement, was 57 trillion US$ in December 2007 (pdf).
That is roughly Four Times the size of the US GDP.
What are they? Well, suppose that we are watching a little old lady crossing a street, and want to take out a life insurance policy that pays if she gets clobbered by traffic. Unless she is close family, or she is a business partner, we can't do that ... we have no insurable interest.
But if we were watching a company, and wanted to buy a contract that pays off if the company can't pay on its bonds, we could. We'd buy a CDS.
So, Monday a bail-out package described by opponents a excrement on toast went down to defeat because after getting compromises to make it, in my view, worse, the Republican leadership could not then deliver enough Republican votes to get the thing passed "on a bipartisan basis".
Like they are unwilling to take unpopular votes to protect business interests? What was more than a decade of votes against the Minimum Wage about, then?
So, the first step is to see if the non-finance sector business lobby has been on the phone with the Rebel Replicants, cursing them a blue streak for screwing the pooch so badly before the Christmas shopping season. Perhaps they are, and so perhaps they will toe the line.
And if not, then the Democrats can turn to putting together a Beautiful Financial Rescue Package that the caucus can support. So, what would that look like?
OK, now, Wash-Mooooo has been taken to the slaughterhouse and the choicest cuts bought by JP Morgan Chase (full disclosure: I bank at Chase).
Didn't anyone know that this was going on? Well, of course people did. For example, back in May of this year, William C. Dudley, an Executive VP at the New York Federal Reserve Bank said:
So what has been driving the recent widening in term funding spreads? In my view, the rise in funding pressures is mainly the consequence of increased balance sheet pressure on banks.
And, obviously, "balance sheet pressure" is a nice way of saying trending toward a risk of insolvency.
Of course, the Fed has been acting for a year now like we are facing a liquidity crisis, when we are actually facing a solvency crisis ... but if you carefully read an analysis by a fairly senior person in the Federal Reserve System, its all there. What's up?
As 
A while ago, as an off-shoot of the 
Over at the 
