Greetings Comrade!

There is tremendous irony in the fact that George W Bush, probably the most conservative president since Hoover, is now on the brink of presiding over the greatest socialistic takeover in American history. Modern economists are nearly universal in their dislike of most types of socialism, but they are also nearly unanimous in thinking that something like a partial nationalization of banks is necessary. The difficulty is that the current crisis has overwhelmed all the conventional tools of monetary policy - there just doesn't seem to be anything else left.

There is an occasional nutbag economist that thinks we can just let the market sort it out. His colleagues overwhelmingly think that the result would be an economic collapse - a cascading tide of businesses going bankrupt, people losing homes and savings, and unemployment skyrocketing. This would be Andrew Mellon's "liquidate everybody" scenario. We know how it played out in the Great Depression, and the far greater interdependence of the world today suggests that it might be worse this time. Mulligan's definition of success is that once the Chinese and Saudis see how cheap everything is (as a result of the collapse), they will come in and buy up enough stuff to restart the economy. Now there's a big hooray.

So why throw money at banks? They are more guilty of creating this mess than anybody else. The short answer is that you need to thaw out the pipes where they are frozen - thawing out those that haven't frozen yet won't help.

Ordinary Americans are already hurting, of course, and the pain is extremely likely to get much worse before it gets better. Obama has suggested cutting capital gains taxes for small businesses and offering them government insured loans. Cutting capital gains taxes is not likely to help much, since the profitable and growing companies are in less trouble anyway.

Government guaranteed loans, expanded unemployment credit, and depression style government employment programs are all at least a bit socialistic, but does anybody have a plausible alternative?

McCain's "buy rotten mortgages" from banks and readjust the terms plan is a pure giveaway to the banks who made the bad loans and the people who took them out - an open invitation for the next raid on the treasury.