In a way, I do agree with you to an extent, it does show the strength of the US, in that we still remain the reserve currency of the world, for now, and global growth, at least at the pace that most people consider to be “normal,” is based upon an ever more leveraged US consumer.

That all being said, there is a point at which the rest of the world says “no mas.” Now, I’m not suggesting that day is today, in fact, I’m of the opinion that the dollar should strengthen if this does turn out to be a prolonged recession (dollar smile theory). When that day comes, US rates, treasuries, corporates, etc etc all dramatically increase. That being said, that day will not come until the rest of the world economy is in a place that it can allow the US economy to become a much smaller cog in the global engine.

In the end, it is the market that sets prices. While our beloved government is taking drastic measures to stem the financial crisis, if you believe in any sort of efficient markets, you have to acknowledge that the market cannot be fooled and will see the eventual cost of the various swap arrangements, bank bail outs, etc etc.

In the end, however, I think the truth is that all the drastic measures being put forth by the US government are more indications of how bad things have become and how much worse they will get, even WITH the bailouts. The only sign of “strength” is the ability of the US to bail out its banking system without tanking its currency, while the rest of the world, by and large, cannot.

While I’m sure you will disagree with me Jim, I don’t think there is anything wrong with recession in of itself. Recessions serve an important structural purpose of reallocating resources to the most efficient use. Honestly, the USA hasn’t had a real, proper, recession since the early 90s. All you need to do is take a look around at gas prices, food prices, the PPI, and you can see the effects of such a long time without a real wash out of the dead weight, which is finally beginning to happen now.

No other country in the world could bailout its banking system with borrowed money that will be repaid with a ever depreciating currency.

Yes, our lenders don’t like it and many of us don’t like it, but we have no choice. The alternative is an economic depression and political instability.

If all new lending is fully collaterized under tight lending standards, then the $Trillion of bad loans will be lost in the rounding over the next decade.

These steps taken by the SEC/FED/White House/Congress are massive bold actions that will contain the mistakes made in 2004-2005.

Do you want inaction, a collasping equity market and another 30’s style depression lasting 10-20 years????