Brain. Cash only, please.

[elfs]

Jim Manzi explains the crisis.

I strongly recommend that you read this article, because it explains what happened to our economic system. Manzi doesn't emphasize enough just how much "leverage" there was in the system; when he talks about fourth parties buying up the rights to the fragmented mortgages sold by third-party bundlers, and the fifth parties buying up fourth party assets, and so on, he doesn't mention important confounding factors: the ability of brokers to create leverages as large as a hundred to one, the failure of regulators to assess this problem as it was happening, and the rating agencies' willingness to mark bundleds of subprime mortgages as AAA. When you buy a product with the expectation that it can be collateral on a hundred times as much credit paper, and the next guy does that on the paper you sell, and the next guy, a hundred-to-one leverage ration become a million-to-one.

Last week, Standard & Poors let slip that at the weekly meeting of their soverign rating committee, the US Treasury's AAA rating came up. If the US loses its AAA rating, then any incentive for other nations to buy our bonds dries up overnight and the only thing we have for servicing our debt is our internal resources: you and me. Right now the debt is $47,000 per person. Are you ready to start paying the interest on a $47,000 loan? (And don't forget, if you have kids, I hope they've got jobs, because that's $47,000 per person, working age or not.)

What this issue doesn't answer is why I and my family, who have a prudent ordinary mortgage, should have to pay either for the bad mortgages of people who bought irresponsibly, or for the failures of financial institutions to properly regulate themselves, or hand over $700,000,000, as much as the combined annual budgets of the Departments of Defense, Education and Health and Human Services, of my money to Hank Paulson to do whatever he wants: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency." (no, really, that's the language in Paulson's proposed bill).

Let it all fail. If we want to keep government out of business, now is the time to do it.

(And yes, I deliberately put on Warren Zevon to write this.)