Milan (AsiaNews) - Financial alarm is extremely high all over the world. But not many seem to have understood to what extent the twofold plunge of the American financial system threatens to immerse the rest of the world in an abyss of economic, social, and political chaos. It may be that only the next generations will understand.

In the first place, many have not grasped the dimensions of the tsunami that has engulfed us. After the Paulson plan was rejected by the U.S. House of Representatives, the Dow Jones Industrial index sank by "only" 7%. The newspapers are writing - and people are thinking - that in reality it is true, stock markets have had their losses, but not as severe as in 1929, when Wall Street lost 22% in a single day. A new '29 could take place, but it has not yet. Nerves are still steady, we have learned much from the errors of 80 years ago: this is what they are telling us, and what we are telling ourselves. In the end, everything will adjust itself somehow, although it might take a little more time compared to other market crises. Some commentators are explaining that in some way, this crisis will even have a beneficial effect, because it will correct abnormal behaviors.

Public debt like in 1945

More informed people know that the rescue of Fannie Mae and Freddie Mac means that their bonds (5-6 billion dollars) are now entirely part of the American public debt. The figure is still not very clear, but some, possibly to muddy the waters, are writing 5-6 trillion. For those who didn't know, a trillion dollars is 7.24% of U.S. GDP in 2007, more or less. More informed people also know that by adding it to the 10.6 trillion dollars of public debt already in existence, the 5 "trillion" of Fannie Mae and Freddie Mac, and the 700 billion dollars of the Paulson plan total 16.3 trillion dollars. In a few days, America's public debt has gone from 76.75% of GDP (2007) to 118.02%, like in 1945, the year in which this figure was highest in percentage terms, because of spending on the second world war.

Never in history has there been such dizzying growth in a country's public debt, in so few days. And yet, many of those who study political economics and have understood the dimensions of the interventions in these days approve of them, and even praise the courage of the heads of American institutions. Paulson, Bernanke, and President Bush, but also the heads of the two parties, Democrat and Republican, with their initiative and sense of the common good placed above party disagreements, are seen as heroes who by their courage are seeking to save the nation's economy and the well-being of the citizens. But few have taken into consideration the fact that, by acquiring (79.9% of) AIG, thanks to a loan of "only" 85 billion dollars, the American government has made it a quasi-state company, which means that its policies are in fact state released bail bonds. In consequence, the risks covered by AIG must be (or better, should be) counted as liabilities in the federal budget. In this case as well, it is still not very clear what the exposure is, possibly another 4-5 trillion - a trillion more or less, obviously. At this point, it is easy to lose count, partly because there is no consideration of the current value - about 41 trillion - of the projected future deficits for health spending (Medicaid and Medicare) and Social Security, which are counted as budget liabilities. If we add these two to the U.S. public debt, together with other similar obligations - about 2 trillion dollars - we arrive, without counting AIG, at 59.3 trillion dollars, meaning 200,060 in public debt per capita, including the elderly, disabled, and children: 429.37% of GDP.

The Paulson plan, "socialism for the rich"

In the face of these figures, the Paulson plan is for "only" 700 billion dollars. And yet U.S. lawmakers rejected it: 2,361.59 dollars of debt for each U.S. resident so infuriated the American people that they flooded their representatives with fax and e-mail messages. The ways in which the plan was described were various, and colorful: some branded it as "socialism for the rich", "state control on the rebound," "a rescue for unscrupulous speculators," "cash for trash"; on the other side, its rejection was described as "shortsightedness" on the part of people ignorant of economic laws, as the "populism" of those riding the wave of unsophisticated popular indignation, with the risk of pushing the real economy off a cliff.

What is often not considered is that on December 31, 2007, the nominal value of all derivative contracts, according to the bank of international settlement, was 596 trillion dollars, and now today, because of the dynamics of exponential growth in recent years, its value is presumably not below 700 trillion dollars. The 700 billion dollars of the Paulson plan Is enormous compared to the other liabilities on the American budget, enormous (432.10%) compared to the total federal budget in 2007 ("only" 162 billion dollars, 1.2% of GDP). And yet the 700 billion dollars of the Paulson plan is, at the same time, a pittance compared with the mountain of financial paper in circulation. These are the infamous CDS (credit default swaps, insurance on credit default). At the end of last year, these amounted to 57.9 trillion dollars, about 120% of global economic production, according to data from the World Bank, 82.7 times as much as the plan rejected by American lawmakers. For those in Asia who might be tempted to watch the difficulties of American imperial power with satisfaction, we recall that Japanese and Chinese investors held 47% of America's foreign debt in 2007.

The mass of paper liquidity is higher than the mountain of water of a tsunami. Like the tidal wave of December 26, 2004, the events of recent days will also swamp many, carrying destruction. This is what was desired by those who fostered, or even failed to raise the alarm over, the imminent financial catastrophe.