Today the US government did some "creative" measures to raise more capital, but by doing so may undermine confidence in the US government . They are on a borrowing spree,using new creative auctions to create money.
Governments are coming dangerously close to just "print" money. This action still has the facade of creating money using instruments, such as bonds. They "sell" the debt and turn it into cash. If the government resorts to the next step, print cash, this may result in "Hyperinflation".
The US government is coming close to changing the financial problems on wall street into the US government insolvency. The current rhetoric is "just this one time". Well, we have heard this over and over again during the last year, and the government continues to lie to everyone.
The solution is simple, fix the accounting, and come clean. Go back to basics, make USA businesses once again the gold standard in trustworthiness on their balance sheets.
To everyone that I have said, don't put your money into Oil, Gold, or stocks, this may be about to change. I still have a hard time recommending buying stock ticker "GLD" for gold, or "USO" for oil, since we are in a deflationary collapse. But that could change if the government prints dollars without using the bond market to do so. With continuing US debt creation at record pace, the world may run from our bond market in fear, triggering the government "an excuse" to just print money.
If we hyper inflate, stocks may turn from worth 2 dollars, to worth 2,000 dollars a share. But your big-mac will cost 100 dollars. (exaggeration example) If this occurs, its complete destruction for USA way of life.
The complete debacle of the US handling the financial crisis reminds me of the last great depression. In the last Great Depression, it can be argued that it was a transition from Britain as world economic force to America. If America continues to act irresponsibly, I believe we will see a transition from USA to China as world financial leader. China made a proposal to "calm financial" by moving off of the USA as financial standard. Even without China, I would assume this was to occur, as USA loses its credibility. But China may have enough fiscal clout to pull it off. And if we balk, China can blackmail the USA with US debt obligations.
UPDATE: 9/29/08 Mish's thoughts on the topic
What to do?
CONTACT your CONGRESSMAN TODAY! Easiest way is through a web site by clicking here. Alternately, you can find and contact your Senator or Representative . Tell everyone you know to contact congress to stop the FED from creating "special money". Tell them enough with the bailouts, enough trying to avoid companies from collapsing. This is suppose to be a capitalist country. In capitalism companies win and lose. Let capitalism take over and have companies insolvent fail, stop the US Taxpayer from "buying" companies in distress.
All of this stems from Financial Ground Zero actions, spiraling out of control.
UPDATE : 9/22/08, Bloomberg Article indicates similar sentiment.