And the bleed continues...

The first run on a bank in the UK in over a century should have tipped everybody off that something has gone very wrong in the world of finance. Now we're beginning to see just how wrong. Northern Rock will have to be nationalized, it seems, leaving shareholders with nothing. What's the alternative? Continue to operate at a mind boggling loss, digging an ever deeper hole when there's no way out of the one you're already in? Screw it. Bury the poor bastard. It's dead.

What was the market capitalization of this company? Oh, only around GBP 380 billion; figure a half trillion bucks or so (actually, it's closer to a trillion if we were rounding up, but let's just be optimistic, here).

That's one half of one trillion dollars -- about five hundred billion, 500,000 million or so -- of "wealth" vanished. Poof. Blotto. Gonezers. That would be about 1/26th of the entire GDP of the United States of America. (How can one little bank in Jolly Olde England be worth that much? Oh, right -- turns out it's not worth anything. In fact, it's worth about negative might-as-well-be infinity. Sorry suckers.) If it's any consolation, I'm sure a few people got goopily "rich" out of this whole thing. I sure hope so. It would just be a total waste otherwise.

This is the basic dynamic that I have been talking about. Money has been created but not wealth. The wealth was an illusion. It's pretty much the same thing in every market that's tied into the global financial megamatrix. Nothing wrong with capitalism, but things just got way out of hand. At some point, somebody has to conceive of some real thing, make it, and sell it; it's not enough to come up with a flashy acronym (SIV, CDO, DCA, FUBAR...) and manufacture money.

Money manufacturing is what's been happening, though, especially over the past couple of decades as computers got more powerful. Hate to break it to you, but the rise in the markets over the past 20 years can be attributed to more processing power, more trades, bigger pots of money moving around in ever more complex mathematical patterns designed to make it grow. It grew, but wealth in the real world melted away. People took shorter vacations, worked longer hours (spent less time with their families), didn't see any appreciable rise in earnings (unless they were among the top five percent or so of earners) paid more for things that mattered like education and health care, saved less, borrowed more. All the while, infrastructure needed by all of us literally fell into ruin. (Yay, market solutions and privatization! Future historians will wonder how we could have been so incredibly bone-headed as to buy this bullshit as our collective pocket was picked.) We were getting poorer in the real world even as the hottest video game on the planet, the financial markets, made us believe we were getting richer. (I'm sounding like a broken record. But it's a really important point that bears repeating.)

Game over. Insert $.25 for new game. Northern Rock is just another domino in a long line still yet to fall. It's a big one, though.

Steel thyselves. It's gonna be OK.