"There will be blood..."

The graphic to your left comes to us by way of dakinikat's fine piece over on The Confluence. (I don't know where they got it.) Look at that deficit! How much longer will Obama be able to say "Blame the guy who came before me?

(Yes, I agree -- we should blame the guy who came before. But the question I ask has nothing to do with the word "should.")

The truly mind-boggling thing is that Obama is not going far enough. Krugman:

Obama and Geithner say the right things. But Simon Johnson nails it:

How long can you say, “we are being bold” when in fact you are not?

But what they’re actually doing is underestimating the problem, doing too little too late, and not being open and honest in trying to assess the true cost. The actual plan seems to be to keep the banks semi-alive by implicitly guaranteeing their liabilities and dribbling in money as necessary, all the while proclaiming that they’re adequately capitalized — and hope that things turn up. It’s Japan all over again.

Maybe the solution is not to do more, in terms of numbers, but to do the politically unthinkable. Why not simply buy -- or nationalize -- the troubled mega-banks?

Look at how much money we are spending to keep the walking dead behemoths ambulatory:

Feb. 26 (Bloomberg) -- President Barack Obama’s first budget request includes a contingency for as much as $750 billion in new aid to the financial industry this year while laying plans for a health-care system overhaul and higher taxes on the wealthy.

The spending blueprint, sent to Congress today, forecasts record outlays for the current fiscal year of $3.94 trillion, up 32 percent from a year ago. That would yield a record deficit of $1.75 trillion in the year ending Sept. 30, equal to about 12 percent of the nation’s gross domestic product, the highest since World War II.

That investment should go directly to the people, in the form of jobs. Right now, we're hoovering up any stray dollars and sending them to elitists who will stash the cash in Cayman Island bank accounts.

Here's an indicator of the Obama administration's priorities: Citigroup has already received $45 billion and will soon receive much more. It will not be allowed to fail. It will not be nationalized. But:

GM and Chrysler, by contrast, have borrowed (un, loans are higher in priority than TARP-y equity) $17.4 billion and are seeking an additional $21.6 billion. So the total they want is less than that already handed to Citi, well less than what AIG received.

The Treasury is threatening to put the two car manufacturers into bankruptcy, and is moving forward in exploring feasibility. This may merely be high stakes poker, but the bluff looks pretty serious.

Bankruptcy is "on the table" for the companies that employ auto workers. But nationalization of major financial institutions is not on any table. As lambert at Corrente notes:

But funny or not, the accounting is hilarious. Why? Because it shows priorities so clearly.

The administration is willing, nay eager, to spend $750 billion dollars on Big Money, even though we don't know what the trillions we already spent went for, or to whom, since the entire process completely lacked transparency and accountability.

Meanwhile, the administration isn't even willing to put single payer on the table, although single payer is proven to work, and would save $350 billion dollars a year.

The most frightening analysis comes from Niall Ferguson. The whole interview is worth reading; I offer a few excerpts.

There will be blood, in the sense that a crisis of this magnitude is bound to increase political as well as economic [conflict]. It is bound to destabilize some countries. It will cause civil wars to break out, that have been dormant. It will topple governments that were moderate and bring in governments that are extreme. These things are pretty predictable.

I was more struck Putin's bluster than his potential to bite, when he spoke at Davos. But he made a really good point, which I keep coming back to. In his speech, he said crises like this will encourage governments to engage in foreign policy aggression. I don't think he was talking about himself, but he might have been. It's true, one of the things historically that we see, and also when we go back to 30s, but also to the depressions 1870s and 19980s, weak regimes will often resort to a more aggressive foreign policy, to try to bolster their position. It's legitimacy that you can gain without economic disparity – playing the nationalist card. I wouldn't be surprised to see some of that in the year ahead.

It's just that I don't see it producing anything comparable with 1914 or 1939. It's kind of hard to envisage a world war. Even when most pessimistic, I struggle to see how that would work, because the U.S., for all its difficulties in the financial world, is so overwhelmingly dominant in the military world.

But how much longer can that dominance continue? Ultimately, U.S. military clout is based (in large measure) on our financial clout, which we're losing. In the U.S., families are streaming into food banks. Foreclosures are causing a sharp rise in homelessness. Layoffs are continuing. Restaurants and retail chains are shutting down. Malls keep shorter hours because nobody wants to buy unnecessary crap (which is what most mall stores sell).

Our state governments are screaming: Higher education may soon end in Nevada, state parks are closing in Illinois, California is carving the education and prison budgets, and Hawaii will probably cut off insurance for all state employees. The pain is everywhere. Obama said in his speech that the new jobs require degrees -- but the states are slashing higher (and lower) education budgets.

The worst of it is happening outside our borders:

In some countries social order has already begun to break down in the face of soaring food prices and spreading hunger. Could the worldwide food crisis portend the collapse of global civilization?

Today we are witnessing the emergence of a dangerous politics of food scarcity, one in which individual countries act in their narrowly defined self-interest and subsequently accelerate the deterioration of global equilibrium.

In many countries the social order has already begun to break down in the face of soaring food prices and spreading hunger. Deadly food riots broke out in a number of countries in 2008. In Egypt several people died in fights in government-subsidized bread lines. Food riots in Yemen turned deadly, taking at least a dozen lives. In Cameroon the food riot death toll was twice as high.

Mexico is close to civil war. There, the drug cartels are the proximate cause, but the underlying problems are "repression, insecurity and the economic crisis."

And in the U.K.:

Police are preparing for a "summer of rage" as victims of the economic downturn take to the streets to demonstrate against financial institutions, the Guardian has learned.

Britain's most senior police officer with responsibility for public order raised the spectre of a return of the riots of the 1980s, with people who have lost their jobs, homes or savings becoming "footsoldiers" in a wave of potentially violent mass protests.

The warning comes in the wake of often violent protests against the handling of the economy across Europe. In recent weeks Greek farmers have blocked roads over falling agricultural prices, a million workers in France joined demonstrations to demand greater protection for jobs and wages and Icelandic demonstrators have clashed with police in Reykjavik.

If war breaks out elsewhere, will Americans really want to expend blood and treasure to restore world order? We have no more treasure. We've shed enough blood during our Iraq misadventure. We are losing confidence in our ability to solve our own problems, let alone the problems in other nations.

Ferguson speaks of the emergence of "extreme" governments based on cheap appeals to nationalism. Although he confines his warning to the so-called second and third worlds, I would place the danger closer to home.

The Guardian story cited above notes a resurgence of activity by the British neo-Nazi group Combat 18. (That's pronounced "one-eight," as in A.H.) As for the U.S.: If the Depression lasts more than a year, any demagogue carrying a flag and a cross will be able to captivate our ill-educated citizenry.

You've been hearing a lot of crap about the "death of conservatism." Don't believe it. Look at history.

Remember the '90s? Remember the militia movement, the bombings, the train derailments, the inflammatory radio rhetoric, the popularity of right-wing conspiracy theories, the incessant calls for violent overthrow? Those things occurred during a time of prosperity. If fascism (yes, that's the word) proved its appeal during the Clinton years, then what will occur when a nation of sensation-seeking dullards, addicted to zombie movies and violent video games, suddenly wakes up hungry and homeless?