Bank Dominos

Well after a good year or two of abject denial, the game of bank domino's is finally here.

Of course the first real sign of this came back in March of this year, but with the quick action of the Fed, as well as the support of the EU and Asian banking systems we were able to delay this deadly game. Unfortunately, their quick initial reaction only helped to make things just that much worse, and instead of letting those foolish banks deal with their own self-made problems, we will now have to foot the bill.

It is almost funny to hear from the mainstream media that the bailout of Fannie May and Freddie Mac will cost only 200 or so billion dollars and that we are only a year at most away from recovery.

We still seem to place out faith in what the corporate media keep telling us, even after it is evident they have lied to us time and time again.

This week may finally be the week when a real sense of the true impact of the economy comes home to rest, but again, this will only be the beginning. There are the debt markets and derivative markets to consider as well, but I won't get into that here.

In the coming weeks, and possibly months, we'll find out that the Fed will not be able to keep itself afloat let alone the several banks and investment houses it has decided to assist. This is why it decided to let Lehman Brothers fall by the wayside, and will probably continue to let others fail well into the future.

If other countries believe that the Fed is over-extended, then there will be a worldwide panic never seen before and most of the financial impact will hit overseas first before it comes back here to the US. No one will want anything to do with the dollar because it's real value will actually be negative.

However, given the global nature of the modern economy, the backlash will hit suddenly like a backhand slap.

Already, airlines in Europe are folding, almost weekly now. Let's see how many more airlines fail abruptly before the end of the year, (some estimates are up to 60 worldwide). And what about next year?

Since March alone there have been 90,000 factories shut down in China, and there's a huge surplus of trade goods sitting at the docks. Many, many more factories will follow for the same reason they succeeded in the first place-they have no margins.

And neither did the airlines. Really the only margins that were left in this modern economy was kept in the hands of big banks and the government, but now their margins are quickly disappearing in smoke.

Of course, our government hasn't had profitability since Bush & Co. took office, but never-the-less have been running on the "good faith" of other countries to lend us the money, but soon those IOUs will come home to rest.

Facing the bailout of so many financial institutions, and itself, while continuing a policy of spend, spend, spend there will be no recovery. Foreign capital will dry up almost completely as these nations will be too busy helping themselves out of this terrible jam.

This begins a downward spiral until a true bottom is reached. Unlike a well, this bottom isn't something that one can simply quantify, or set in stone because the factors which have caused this haven't been corrected. And until they have been, there will be almost no limit to how far our collective economies will tumble.

One thing is for sure, this will spell the virtual end to the global economy as we know it today. By the time there is any semblance of stability, transportation costs will be much too high for small ticket goods to be shipped vast distances. Airline travel will be limited to the wealthy few, and smaller nations will balk en-mass, as they are already beginning to do now, to our version of global prosperity.

As such, the global peg the US dollar once had will be erased forever, and with it our vision of an American hegemony for the world.

How long we continue to keep our head in the sand is entirely up to us, but either way the real damage has already been done. Even if the housing market stabilizes, the economy will feel the pain for several years to come for several reasons.

The American consumer is completely tapped out. Other than the wealthiest 1 percent, the rest of us saddled with our own debt, will now be paying for the governments bailouts over the past year, a continued trade deficit that will not longer be paid for by other countries, and a failed government straddling itself with even more debt as the baby boomers begin to retire en mass.

Now, because there is little manufacturing base left in this country, there is only the hope that the American consumer will lead the economy back on its feet, and as is already evident, we have nothing left with which to buy our country back into prosperity.

So, until those economic dominoes stop falling around us and we have emerged from our own collective debt to again spend our economy back into prosperity there will be no recovery in sight.

Of course, it is the system that let us down. The abject deregulation of the financial industry, the constant lies of "All is Well" that are fed to us via mass media, and the inability of the government to do anything other than make things worse, we might not see the end of the tunnel for a very, very long time.

Ironically, those countries which will be least effected by this world-wide game of dominoes are the ones we are getting closer and closer to war with right now. That is, other than the Gulf states bordering Saudi Arabia.