Net Worth

The federal government has come up with a plan whereby it -- meaning we -- will assume the bad debts of the financial institutions in trouble. Now you're probably really mad. Why should we be on the hook for a situation we didn't create? Why don't the bad guys take the fall?

Why were there no whistle-blowers out there? Because everyone was in cahoots? Partly, but it's mostly that these new financial instruments like "credit default swaps" appeared on the scene so stealthily -- and the results were so good -- that most of the experts didn't know how or when to blow the whistle. When it comes to regulation, it would be great if there were a financial FDA that could give these things some kind of test on a limited scale before they're actually put into widespread use.

You can lock up all the bad guys you want and deprive all the evil CEOs of their assets and turn these miscreants into the nation's newest homeless. But that's not a fix. These institutions are really too big to fail. It would be one thing if we had just screwed ourselves, but it's not that way. The United States economy is largely owned by foreigners. When AIG was poised to go down, for example, it was going to take hundreds of billions of dollars in Japanese investment with it. And if foreigners lose confidence in their U.S. investments and pull out, this week's calamities will seem like minor foreshocks of the Really Big One.

It all goes back to the question of what has value. Value comes from whatever people have confidence in. The value is in the confidence itself, not the investment object. A lot of people lost confidence in stocks this week and put their money into gold. Why is gold valuable? OK, it's pretty, it's resistant to corrosion, and it's a wonderful electrical conductor, but it really doesn't have much else to recommend it. You can't eat it, drink it or power anything with it. You don't have to think about it or understand it, but you know that a lot of people have confidence in it, and there's where the value is.

So what our leaders have to do is restore the confidence -- the trust -- in the American economy, which really is too big to fail. When the airplane loses power and starts to go down, the pilot pointing a finger at the co-pilot and saying, "It was your job to check the fuel before takeoff today" doesn't solve the problem.

There, now I've said it.