I'm sure Atrios will have a big "Wheeeeeeeee" post on the bottom falling out of the markets
despite the bailout/demise of Bear Stearns. But, this is getting really scary. Don't get me wrong. The demise of Bear Stearns, by itself, doesn't bother me in the least. They almost certainly deserve everything they're getting. But, this is only the tip of the iceberg, and the Fed knows this or it wouldn't have waded into the quicksand full steam ahead like this. (Can you wade into quicksand full steam ahead? I guess that's a mixed metaphor). It strikes me that much of what the Fed is doing right now is outside the scope of its powers, but I doubt too many people will complain. After all, it's the viability of the world financial system that's at stake. If it crumbles in ruins, I doubt anyone has any idea how to rebuild it.
Somehow, this is beginning to make Jared Diamond's book Collapse
look more and more prescient. There, he attributes one of the factors that brings on societal collapse is interdependencies between and among cultures that fail. The early settlers on Pitcairn Island, for instance, were dependent on trade with nearby islands. When those trade links were broken, the Pitcairners died out through starvation.
If you think of how the world economy is almost totally dependent on the world financial system, the collapse of that system has the potential to wipe out much of the world economy, and perhaps civilization (whatever that is) with it.