So trust matter for capitalism. London's money markets froze because of a trust collapse; banks simply don't believe each other when they say their businesses are sound and will not default on their obligations.

Gary,
Michael Tomasky in the Guardian says that the financial crisis is bringing the Main Street Wall Street alliance to an end. The Republican coalition since at least Reagan has been a alliance of Wall Street and Main Street.

Main Street" means, in short, the right-wing populist aspects of the current GOP--guns, God and gays, abortion, rallying the decent common folk against the coastal elites, etc. "Wall Street" means, literally, Wall Street -- more specifically, the pro-corporatist policies that the party puts in place once voted into office by the people on Main Street: the tax cuts for the wealthy, the stern opposition to almost all regulation and oversight of the private sector, the denial of a human role in climate change (because to acknowledge would imply the need to do something about it, and that means regulations and oversight), a host of policies like that.

The alliance worked in terms of a populist politics, since the attack on "elites" were the vehicle for Wall Street policies. Tomasky says;

Get the little people to vote you in. Give them a small tax cut and lots of symbolic stuff that has no actual price tage. Give the store to the big people. That's the Main Street-Wall Street alliance. This bailout proposal puts them at each other's throats far more directly than I can ever remember in my adult lifetime.

Tomasky references this article by Mark Schmitt in American Prospect.

Peter,
In Palin’s American Exception in The New York Times Roger Cohen writes:

Behind Palinism lies anger. It’s been growing as America’s relative decline has become more manifest in falling incomes, imploding markets, massive debt and rising new centers of wealth and power from Shanghai to Dubai.The damn-the-world, God-chose-us rage of that America has sharpened as U.S. exceptionalism has become harder to square with the 21st-century world’s interconnectedness.

The angry exceptionalism that is Palinism has its roots in the view that the United States is a nation unlike any other with a special mission to build the “city upon a hill” that will serve as liberty’s beacon for mankind

Taken together, the financial mess and the Middle East mess seem to have undermined whatever legitimacy the US had. As well, being the cultural production centre of the globe works to their advantage profit-wise, but it also means the rest of us get to see every bit of nastiness the US can possibly reveal about itself - from Tarantino to Palinism.

Imagine if Colin Powell was speaking at the UN today trying to convince everybody to go to war. Would the US even dare to try such a thing now?

Lyn
And the credibility of the Republicans--- The House Republicans propose to try to solve the financial crisis by eliminating capital gains taxes? Factss such as troubled financial institutions, by definition, not having capital gains to tax, doesn't seem to bother them.

Lyn,
It now looks as if the Wall Street meltdown is a huge economic and financial event that also signal a historic shift in global politics – a moment that both marks and accelerates the decline of American power.

Nan,

There's a fair bit of discussion about whether this marks the end of neoliberalism, but not as much about a decline in American power. As if they're somehow separable.

Thinking about the historical context of Wall St, the US and the rest of the world in the Great Depression, this is a whole other animal.

Peter,
I'd argue that it's about way more than the Republicans. I haven't noticed the Democrats proposing that the American way of life, or American exceptionalism, are due for a re-think.

The Bush presidency has certainly sped up the process, but I imagine that in longer term hindsight, historians will be describing a much longer and more complicated slide.

Lyn,
there is an interesting discussion between Naomi Klein and Amy Goodman on neo-liberalism here on Democracy Now. Klein argues that the
the thesis of my book, what I mean by the “shock doctrine,” is that it is in times of crisis, it is in times when people are panicked, when we’ve seen again and again the right push through radical pro-corporate policies, what they call “free market reforms,” precisely because it is in a crisis where the space for debate rapidly closes, and you can invoke this state of emergency to say we have no choice.

And I think we’re seeing a very dramatic example of this tactic right now with this really extortionist kind of tactics playing out in Washington. You know, “Sign this blank check, or we’re all going down, or Main Street is going down, or taxpayers—you know, the sky will fall in on them.” I’m also arguing that this is only stage one of the shock doctrine.

If the Republicans take power, it will be in the midst of an economic emergency. They’ll invoke that emergency to push through very, very radical changes--- they want right-wing, pro-corporate economic changes, attached to a bailout.

Klein says that the crisis that is being deepened right now through these bailouts will be invoked for even more radical deregulation, privatization, tax cuts and so on.

Nan,
It's an interesting thesis. Reading blog comments from Americans around the traps today, I've been reminded of last year's election when there was rising expectation that Howard would manufacture some emergency, produce another Tampa. People are expecting Wall St to be closed, the election to be cancelled, all sorts of wild stuff.

Assuming the thesis is right, it appears that it only works for so long before people start recognising it for what it is.

Also, I'd argue that deploying shock tactics in a domestic situation is one thing. In a global situation it's another. In a global economy, there must be a tipping point where international investors see the US as too high a risk. Not that I know anything about global economics, but it seems to me that if the current situation was used to exacerbate the underlying cause, smart people everywhere would start opting out.

Thought anon's comment about their cranky contrarianism exceptional.