As we mentioned, this Excellent Bailout Bonanza, this Paulson Ponzi-Plan, is just a sideshow to distract everyone from the real issue, which is of course the Derivative Death-Star, with a Quadrillion Dollar mass that is about to implode, detonate, and morph into a financial black hole that will suck the entire world economy into its dark, massive, foreboding center. The subprime debacle is just one of the many fuses leading into the gargantuan derivatives powder keg. The subprime paper to be auctioned is little more than a catalyst for the creation of the real disaster, which are the credit-default swaps and interest rate swaps, an entangled, Byzantine labyrinth of opaque, unregulated counterparty risk that will be ignited by continuing corporate bankruptcies and double-digit interest rates that will be created by a hyper-inflated economy awash in bailout dollars which the Fed will have created out of thin air.

Foreign nations with dollar forex cannot possibly keep buying all the treasuries that will have to be created to fund all these bailouts because they are all experiencing rampant inflation, and printing more of their own domestic currencies to absorb the dollars necessary to purchase treasuries is no longer possible without risking social upheaval and revolution as hyperinflation destroys their economies. This means that some, or even most, of the new treasuries that will be created by the Treasury and the Fed to fund the bailouts and deficits will have to be monetized, which is immediately inflationary. M3 is about to explode as these many monetizations and the Fed's trillions in liquidity injections continue to flood the fiat money and credit system, which will continue in its cryogenic state despite the Paulson Ponzi-Plan that will now be implemented in an attempt to re-inflate the credit markets, which are the lifeblood of our debt-based, fiat money system, thanks to the cessation of the gold standard. Everyone on Wall Street knows that the subprime paper is not the real problem. The real reason they distrust one another, and will not lend to one another, is the unknown counterparty risk that will go into a plasma state when the Derivative Death-Star detonates. It is the opaque, unregulated OTC derivatives market that they are really afraid of.

Due to the fact that you have 70 or more trillion of credit default swaps insuring 5 trillion in bonds, a ten billion dollar loss by a large corporation can on average morph into a 140 billion disaster of epic proportions that could wipe out several other companies, whose own credit-default swap counterparty risk would then ignite, in a chain reaction reminiscent of a thermonuclear explosion. Remember, credit default swaps are not true derivatives with a zero net sum.

But unlike most insurance, there are no regulators or loss reserves, thanks to Slick Willie Clinton and the Congress, which passed the Commodity Futures Modernization Act in 2000. Worse yet, they can be used to insure property which the insured party does not even own. Hence, you can see why everyone trembles at the thought of this radioactive sector going thermonuclear.

Did you see how the stock market received the Paulson Ponzi-Plan? They used it as an opportunity to de-leverage, which is pretty much all it was good for, and the Dow was taken to a new low in the process. No problems have been solved, and we will continue on to our ignominious destiny with recession, depression, and a third world Banana Republic standing where we are all but irrelevant to the world economy. No one will have anything but worthless paper to spend for foreign tangible goods.