September 16, 2008: Lehman, Merrill, AIG and ?...the new WMDs

The obvious focus by just about everyone is on the domestic ramifications of the collapse of some of Wall Street's storied financial giants.

It is my belief that the decision on what financial entities to bail out and what financial entities to let sink into oblivion is being orchestrated with an eye towards international power politics. The United States and all of our allies will suffer to a greater or lessor degree - but all will recover in comparatively short order from the present market turmoil.

What is going on within our two main international adversaries, Russia and China? Chaos.

In fact, when it comes to containing both countries, the selected demise of companies such as Lehman may be as potent as a WMD.

Tightening access to international capital and huge stock losses are hurting the government-selected wealthy in these countries as well as state-owned enterprises. In fact, according to Bloomberg, there are calls by "businessmen to heed Western complaints over Kremlin policy" concurrent with the sharp drop in the value of their assets - hard and soft. The stock market is plunging, capital is fleeing and there is a severe shortage of liquidity in the banking system. And look at the recent commodity price downdraft, especially in oil.

China is in the same boat.

Both countries may well hold a lot more debt in or contingent to companies that are being allowed to fail than is known by the average analyst - but not lost upon our government agencies that serve to protect us.

I have not heard a convincing case as to why the United States Federal Reserve and Department of the Treasury are selectively allowing financial failures. With our troops spread thin and China and Russia acting in an increasingly belligerent fashion, the financial crisis may well be an opportunity to inflict a powerful warning shot across their bows. As with Reagan and Star Wars bankrupting communist dictators in the 1980s, Bush and Selective Financial Failures may have presented an unintended opportunity to smack down our primary adversaries.