KEY POINTS:
Capitalism, the marvellous machinery of mobilising money for its maximum value, has made the world we know.
Life is comfortable, entertaining and equipped with luxuries and conveniences that would never have been imagined, let alone affordable, without the fertiliser of ready finance, shared equity, limited liability and rich rewards.
The genius of the system is the way it can punish mistakes. Takeovers and competitors step in with no disruption to supplies and services. But when money makes itself the product, its disciplines disappear.
It creates financial instruments with no measure of performance beyond the market's faith in the mirage.
Then, when the bubbles burst and the money evaporates we discover yet again the limits of financial intelligence. It is evident in this Wall St alarm that nobody really knows what to do.
All faith and hope now resides in the wisdom of the United States Federal Reserve. Whatever it does will be applauded.
On Tuesday it was wise to let Lehman Brothers bank collapse. On Wednesday it was right to rescue the insurance giant AIG.
The chorus of approval is probably an insight to the problem that creates these crises. Finance markets are a realm of mass perceptions rather than reality.
All participants would have known in the later years of the long boom that it had become fuelled by home mortgage securities of little substance. It didn't matter as long as everybody else thought it didn't matter.
Besides, if you didn't go with the general perception you could not make enough money to be competitive. The traders probably all agreed over dinner that it was madness but you had to be in on the action.
Reef fish, as David Lange described them, are easily turned. All they might have needed was a hint of tougher mortgage security requirements from George W. Bush or his appointee, Fed chairman Ben Bernanke.
It might have been done with a simple instruction to the country's two state-chartered home mortgage guarantors, Freddie Mac and Fannie Mae, that they were not to stand behind sub-prime customers (also known as Ninja - no income, jobs or assets).
Intervention would have been unpopular; the President would have been a party pooper and accused of shutting poor people out of the property boom. So the bubble wasn't punctured and Freddie and Fannie joined the action.
This month they too were bailed out of combined losses of nearly US$14 billion ($20.7 billion) in the past year.
Each rescue is hailed as the right thing to do and stock markets register a slight bounce.
But the next day they slump again and confidence gives way to more conjecture that this is a crash comparable with 1929.
It may be, but the consequences are unlikely to be the same; governments have learned that if a failure of capital markets begins to reduce activity and employment in the real economy, they can stimulate it by spending more money, or printing it if they haven't got a tax surplus.
Bush blew the US surplus a long time ago with tax cuts and his idiotic war. This crisis could turn out to be less like the 1930s than the 1970s, when US monetary policy had been too weak to counter the inflationary consequences of an earlier war without visible end, followed by a contrived rise in oil prices.
We have the war and we've had an oil shock, generated not by producers this time but by futures trading. Oil was briefly the best thing going after the bubble burst on unsecured property debt last year.
The predictions that drove oil prices through the roof came mainly from the Wall St investment bank Goldman Sachs, interestingly the only one of Wall St's big five that seems to be surviving the crisis - so far.
Though fuel prices have relented recently most of the gains remain. Gains for futures traders, that is. The real economy is left with a round of inflation that will not be helped by the billions that the US Treasury is injecting into Wall St, plus the additional credit being created by the Federal Reserve.
This time next year the real economy might have survived a mild recession and be facing persistent inflation, a harder beast to bring down.
By then Bush will be gone, his economic legacy as bad as his war. Weak conservatives make the worst sort of economic managers. Confident in business but averse to political hardship, they can do more damage than liberals who, weak or strong, are more conscious of their limits of competence.
The US is floundering now, propping up one financial edifice after another and each rescue just seems to reinforce the panic apparent in sinking sharemarkets.
Nothing may be gained unless the system is allowed to self-correct. Careless banks should collapse and the Treasury's billions could be used to rescue small savers, not the institutions that need capitalism's salutary lesson.
