Bush’s comments didn’t do much for investors confidence. Shares in troubled mortgage outfits Fannie Mae and Freddie Mac tumbled, along with most other financial stocks.

The bottom line is the U.S. financial system is now beyond credibility, as James Howard Kunstler puts it. And Dubya and his Republican party will be remembered as the party that broke America.

With the death of the IndyMac Bank (NYSE:IMB) last week, and the GSEs Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) laying side-by-side in the EMT van on IV drips, headed for the Federal Reserve’s ever more crowded intensive care unit, there was a sense of the American Dream having passed through the event horizon that denotes the opening of a black hole.

What would happen if the U.S. government acted to bail out these feckless enterprises (and what if they don’t)? Either way, it’s not a pretty picture. If Mr. Bernanke does start shoveling loans into the GSE black hole, he’ll further undermine the soundness of his own outfit and do nothing, really, to repair Fannie and Freddie’s structural problem of having securitized too many loans that will never be paid back. If instead Fannie and Freddie are flat-out taken over entirely by the U.S. government (and remember the Federal Reserve is not the government), then the national debt will roughly double overnight – which will pound the U.S. dollar down a rat-hole.

Meanwhile, the foreign holders of those decrepitating dollars might not rush to the redemption window, but they certainly would use them to buy up every oil futures contract on God’s not-so-green Earth as fast as possible – they’d be dumb not to – which would leave American Happy Motorists with gasoline prices north of $5 a gallon, and possibly north of $10. (In that case, say goodbye to the airlines. In fact, say goodbye to what passes for the rest of the US economy, including especially the vaunted retail sector that supposedly counts for 70 percent of the action.)

If Fannie and Freddie are left to die out on the desert floor, say goodbye to the housing market, the major investment banks, countless regional banks, the retirement accounts of virtually everyone in America, the viability of all fifty states’ governments, and the day-to-day operating ability of all their municipalities – and very likely the current incarnation of the world banking system.

This process is really out of control now. The bottom line is the comprehensive bankruptcy of the United States. The Republican Party under George Bush will be known as the party that wrecked America (release 2.0). Painful as it is, Americans had better get a new “Dream” and fast. It better be a dream based on the way the universe actually works, which is to say an operating procedure run on earnest effort and truthfulness rather than merely trying to get something for nothing and wishing on stars. We might begin symbolically by evacuating Las Vegas and calling in an air strike on the loathsome place – to register our new reality-based attitude adjustment.

Source: Event Horizon