Megan McArdle is trying to scare the crap out of us lately, by essentially recasting last week's meltdown as close to a nuclear holocaust akin to a Cold War novel by Tom Clancy:

I do not work for the Treasury, the Fed, or an investment house, so take this for what it's worth.  But my understanding is really, frighteningly close.  Remember the monster that lived under your bed when you were five?  Actually, mine lived in the closet.  But that's not the point.  The point is, that monster was loose on the financial markets last week.

She goes into quite some detail about exactly the monster is, and how it almost got out.  It's a worthwhile read... but she's also being rather bipolar about the whole thing.  She also put out this interesting morsel:

Wall Street is telling us that Wall Street needs to be bailed out.  A Goldman man has run the Treasury for six of the last thirteen years.  I am sure that they think what they are doing is necessary.  But anyone who works long in any industry comes to view it as having an outsized importance in the world.  If you doubt this, spend a few moments listening to journalists prate about the sacred privileges of the press.

The problem is that they're sort of right.  There is no industry in America that does not depend upon Wall Street.  If credit seizes up and the banks fail, everyone will suffer deeply as businesses cut back for lack of capital, mortgage capital dries up, credit card rates rise and car loans become hard to get.

But that doesn't mean one has to support the current bailout--you can add me to the list of libertarians standing athwart history shouting "stop!!!"  I don't think we can punish risk taking managers and the shareholders who enabled them as thoroughly as we might like without possibly taking the rest of us down with them.  But allowing banks to selectively offload their crap on the government without so much as a rap on the knuckles for having bought the crap in the first place is taking things too far.

And finally comes to the conclusion that we need a bailout... though perhaps not this bailout.  She makes a good case for a bailout... and yet doesn't actually propose an alternative to the one she doesn't like.  I can understand that what happened last week could have been bad... very bad.  Perhaps it was even bad enough that the markets needed some government intervention to insert some sort of liquidity to get things kickstarted again and prevent runs on money market funds.  But what is being proposed now is not a short term injection of liquidity.  It's nothing short of nationalization of certain companies, and wholesale buying of debt with no oversight.  Surely, this ought to be viewed as trying to squash a bee with a sledgehammer.  Even if you are deathly alergic to bee stings, I don't think you'd welcome the proposed solution if that bee landed on your head.

After all, as this Wall Street Journal article reminds us, the 1929 Stock Market Crash and the Great Depression weren't one in the same.  More importantly, there is a great deal of historical research that shows that many of FDR's programs which people foolishly credit with saving us, actually deepened and lengthened the Great Depression... even if they made people feel better because we "were doing something".

As I said earlier, what dissapoints me most here is that the candidates aren't even changing their tunes regarding campaign proposals.  This is just plain dumb.  Our national debt structure and financial capabilities are going to be completely different.  To be incapable of changing proposals in light of this new reality shows that both are unfit to be elected dog catcher, let alone President.  To attempt to recast their old proposals as somehow more important than ever to jumpstart the economy is laughable.  In fact, out of both of them, McCain is being most dumb with his suggestion that Cox should be fired, and that he'd replace him with Andrew Cuomo:

McCain wants to fire Chris Cox as head of the Securities and Exchange Commission and appoint ... Andrew Cuomo, under whose leadership the federal "Department of Housing and Urban Development damaged several New York neighborhoods when it permitted scam artists to bilk the government out of federally secured mortgage and construction loans in the late 1990's."

Seems like just the right man to solve the toxic mortgage crisis. ... P.S.: This wasn't a tiny fraud. It was a quarter-billion dollar scandal that severely disrupted the redevelopment of Harlem, among other places, by gumming up the market. But hey, it was non-profit fraud! ... Apparently, McCain's not just going populist left. He's going irresponsible, opportunist populist left.

George Will is going even further, and compares McCain to the Queen of Hearts from Alice in Wonderland demanding "off with Cox's head!", and that his current reactions show his unfitness for President... even more so than Obama:

It is arguable that, because of his inexperience, Obama is not ready for the presidency. It is arguable that McCain, because of his boiling moralism and bottomless reservoir of certitudes, is not suited to the presidency. Unreadiness can be corrected, although perhaps at great cost, by experience. Can a dismaying temperament be fixed?

I can at least take solice in the fact that while the other Republican candidates were busying themselves about talking about terrorism, Ron Paul was very aware of what was going on.  And while people snickered about this crazy Gold Standard thing... look what Central Banks are buying up:

Central banks may be starting to turn to one of the few assets in which they can invest: gold.

Turbulence in the financial markets and recent U.S. dollar weakness are helping the precious metal claw back its reputation as the central monetary anchor within the international monetary framework, industry participants say.

This is a marked change from a decade ago, when 14 European central banks decided to reduce their gold holdings in an orderly fashion. They signed a pact to sell no more than an agreed sum between them each year. In addition, the U.S., the Bank for International Settlements ...

I don't understand... I thought gold was silly.