America was conned—who will pay?

Bear Stearns marks the moment when the global financial crisis went critical. Up until last Friday, it had been possible—just about—to believe that the worst was over and that things were about to get better. That pretence was stripped away when JP Morgan, at the behest of the Federal Reserve, stepped in when the hedge funds pulled the plug on the fifth-biggest US investment bank.

It is now clear that no end is in sight to the turmoil, and the reason for tha is that the Fed and the US treasury are no closer to solving the underlyin problem than they were eight months ago. The crisis will only end whe house prices stop falling and banks stop racking up huge losses on their loans Doing that, however, will require the US government to intervene directly in the real estate market to end the wave of foreclosures. Ideologically, it is ill-equipped to take that step and, as a result, property prices will fall and the financial meltdown will go on and on

Ultimately, though, action will be taken because there will be political pressure for it. Indeed, it is somewhat surprising that there is not already rioting in the streets, given the gigantic fraud perpetrated by the financial elite at the expense of ordinary Americans.