The question now is will we be prepared for and have a say in the alternative.

I think this is why it is absolutely important that we get this economy moving again with jobs. Once we have close to full employment and a true recovery focus on the deficit and debt load. We have time - even this report from the Guardian doesn't talk in terms of immediate transition.

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Actually, repricing oil with a basket of currencies has been discussed before by OPEC. The weakening of the US dollar breeds speculation in gold and currency markets. If we had to pay for imports in, say, euros -- what then? $6 gasoline? Higher interest rates? Pull out of NATO? I suspect some of us will have a diminished standard of living until we get our house in order, but the "stateless elite" will simply keep coining money by any means available.
Frank T.

Consider a nation that lives far beyond its means. It must borrow from foreigners to make ends meet. However, since it has the world's reserve currency, it can borrow in money that it creates out of thin air.

Now consider the same nation without reserve currency status. Suddenly foreigners demand that it pay in their own currency. How can it get another nation's currency except through trade. But the nation has a massive trade deficit.
This means that America will have to live within its means. It'll have to save money. It'll have to create products that the rest of the world wants.

Of course living within its means also means that we can't be starting wars all over the world anymore. We can't have a military that is larger than the rest of the world combined. We can't afford to give massive tax cuts to the rich.
There are advantages, but they are down the road. The pain is in the short term.

There are two other factors, right off hand, that contribute to the preservation of TBTF-ness.

One, you can't allow bank shareholders to take a bath. With America's recent history of dependence on "big finance" debt peddlers to populate the DOW (after survivorship bias thinned it down to 25% or less of it's original corporate composition) there's really nothing left to instill CONfidence in the markets, and the behavioral economists won't have any speculation bubble economy to re-inflate if the big banks took a bath.

Two, you have GLOBALISM, the international interdependence and connectivity that spreads risk and obligation across derivative insured international counterparties. This is the mechanism by which too big to failness both perpetuates and protects itself. Once you begin the process of severing those international "ties" you risk the chain reaction of so called systemic counter-party defaults that collapses the entire global monetary system and you get memos placed under the nose of congress about famine, revolution and world war, then they shit their pants and capitulate to terrorists like Paulson who concoct a bait and switch ransom to rape the taxpayer "for their own good".

It's a quite predictable conundrum if you study the history of the money changers from about the time of the Lombard (Venetian banking) collapse to the present. It's all either been done, or attempted, before.

it seems.

Although I agree that the "too big to fail" institutions plain need to be corralled in and/or broken up so they simply cannot affect a global financial system to this degree.

But on derivatives, I want the models themselves regulated and something heavy has to be done on credit rating agencies too.

I also want software, engineering solutions, well, regulated and monitored.

Then, I have questions on the existing regulatory bodies. Where was the S.E.C.? Where was the New York Fed? What is happening to reform these two supposed watchdogs, completely asleep at the wheel.

What good is regulation and legislation if we have no real finance cops?

I agree they need to roll back and reinstate Glass-Steagall. This snow of rhetoric and "plans" trying to avoid that is getting old to me.

Great site but how paranoia inducing! I just checked some of my own accounts, watching the liabilities dramatically increase in 1 year.

stated in a most pithy and succinct manner:

Inequality causes unemployment. Unemployment causes inequality.

Great catch!

Most of these failed banks were suppose to be supervised by FDIC. Hot money via brokered deposits may have had a huge impact on the situation.

But was the FDIC doing - twiddling their thumbs?

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