Once I built a railroad; now it's done

The most poignant political moment in a very very bad week for the economy and for civil liberties came when the 90ish NPR commentator Daniel Schor soloed a verse of "Brother, Can You Spare a Dime." Let's party like it's 1931.

This week's whiffs of the 1930s:

• A bank run: failed IndyMac Bank was besieged by depositors unconvinced by federal guarantees
• A crash in the stock price of what most people thought were the federal guarantees - Freddie Mac and Fannie Mae. On Tuesday they lost 25% and 22% of their market value.
  
• runs on bank shares - down 4% in one day yesterday
• lunatic overextension: "At the end of the first quarter Freddie’s balance sheet showed assets of $803 billion and shareholder equity of just $16 billion," CNNMoney reported. "That means Freddie has just one dollar in equity for every $50 of mortgages and other assets it holds. The company’s mortgage portfolio is even more disconcerting, as it shows just 70 cents worth of equity for every $100 worth of business on its books."
• political paralysis. As Steven R. Weisman put it in the NY Times, "the latest trouble in the financial markets, rising energy prices and spreading joblessness were also sowing new discord among lawmakers" about social programs vs. tax cuts. Which brings us to:
• intellectual paralysis. Same liberalism attacked by the same conservatism. So far that's all she wrote.
  
• steady betting against the US: the dollar is weak and always ready to get weaker. Nobody wants to buy our steaming piles of dubious, odoriferous investment vehicles. Why buy even T-bills when the dollar will sink? Why buy our crappy debt when you can just buy the Chrysler building instead?
• fear: in one major way we are still where we were in August 2007: nobody knows what's in these instruments. Nobody really knows what they're worth. Nobody knows what they should pay for them. Nobody knows how risky you are. Everybody thus raises their rates.

Nothing got better in the 1930s until the paradigm changed. Nothing got better until the fear was contained.

If instead we carry on as we are, there will only be steady decline. Gretchen Morgenson summed it up on Sunday when she started her column like this:
It’s dispiriting indeed to watch the United States financial system, supposedly the envy of the world, being taken to its knees. But that’s the show we’re watching, brought to you by somnambulist regulators, greedy bank executives and incompetent corporate directors.

This kneeling has been going on for fifty years, as we have walked away from a series of lines in the sand.

• we have the best manufacturing workforce in the world, we said through the early 1970s. Then we gave that up.
• we have the best corporate managers on earth, we said through the 1980s and 1990s. Then we gave that up.
• we have the best high technology, we said through the 1990s dot-com era. Are we giving that up?
• we have the best capital markets in the world, we're still trying to say. We're giving that up. The basic math doesn't come out right. Can we still add and subtract? What numbers should we add and subtract with?