By Ambrose Evans-Pritchard
September 16, 2008 Unlike mortgage giants Fannie Mae and Freddie Mac, broker dealers are not crucial pillars of the US housing market. Lehman is an optimal candidate for ritual sacrifice. While the appearances of free market discipline have been upheld, the reality of the weekend events is a further lurch towards socialism, or state capitalism if you prefer. The Fed's lending window has been widened, allowing all forms of investment grade paper to be used as collateral in exchange for taxpayer credit.
As this newspaper has long feared, the world is now faced with both a tightening credit squeeze and a synchronised hard-landing across most of the world economy. The eurozone and Japan are almost certainly in recession already. Britain will follow soon. America is plummeting into a second downward leg as the fiscal stimulus package fades and the exports mini-boom stalls. China cut interest rates yesterday following a sharp fall in property prices over the summer. Superficially, one can blame Lehman and its ilk for the excesses that led to this crisis. However, the root cause lies in the actions of governments across the Western world. They held interest rates too low for much of the past two decades, and encouraged the debt burden to explode to unprecedented levels.
Having caused this crisis, it would now be remiss for governments to pursue a policy of strict debt liquidation in the name of capitalist purity. As the bankruptcies mount, the state will have an obligation to step in to preserve social stability. If that means the temporary nationalisation of large chunks of the Western economy, so be it. This is too grave a crisis for ideological preening and free market infantilism. May those calling for debt liquidation ''a l'outrance" be the first in line to lose their jobs.
Clearly America is busily bankrupting itself, having lived beyond its means on credit, low interest rates, the yen carry trade and most damagingly, exotic financial instruments for years to finance its profligate lifestyle and debt - just like the UK. Its excursion into the financial alchemy of derivatives has been its attempt to avoid the inevitable demise of the US as a global financial power and the hegemony of the dollar in global markets.
We are witnessing the death of the USA as the leading world economic power and the passing of the hegemony of the dollar, as we witnessed the death of communism in 1991. Temporarily the ship has no anchor and is drifting in a storm in a sea on uncertainty, seeking a safe haven. The ECB and the Euro provide a harbour of tranquility and stability in these turbulent times. Yes, the EU has problems but they are risible compared to the disaster that is America.
The readers' comments are just as entertaining. Who's next after Lehman Brothers is fed to the wolves? | 
