BAILOUT BILL PASSES

No updated media stories yet; but just confirmed this live on TV. Our worst fears confirmed -- what could have been just an ugly downturn will now probably be a lengthy depression and in many ways, the final nail in the coffin for a sovereign United States.

Update: Here's a news article.

Update 2: The market barely paused on the way down after the bill passage; as I write this the Dow has reversed course over 200 points to the downside.

Update 3: Minyanville has reprinted comments from Mr. Practical from back in March which we think are worth re-reading in light of the latest bailout attempt:

.... when government grows too big and through its hubris believes its bureaucracy knows more than the market, the seeds of eventual deflation are sewn... I'm talking about direct intervention in the supply of credit to “ensure price stability.” That lie is due to the political refusal to allow the market to tighten.

The problem becomes worse when big government aligns itself with big business (the extinction of entrepreneurs) to affect the natural self-correction processes of the market.

Years of debt accumulation aren't cured by a 5% correction in stocks, as Wall Street would have you believe. A major debt correction -- one that the market has been trying to accomplish for years but which has been rejected time and time again by Fed policy -- is necessary to correct the huge imbalances that exist. To deny the necessity of this eventuality is, of course, human.

Total US debt is now 3.6 times GDP and continues to grow. But new debt is less and less effective in driving economic growth: More income is going to service that debt and less to creating production, the stuff that generates income.

In 1929, US debt was 2.9 times - the second highest it's ever been. Despite Mr. Bernanke’s false recollections of Fed actions back then, they created an immense amount of liquidity (credit) trying to cure the stock market crash. The market did rally temporarily as a result, then slowly crashed to deeper lows, since that new credit just went to short-term speculation in stocks. The new money did no real good, because there was already too much capacity, so the credit never went to creating production.