Pro Libertate: The Denouement (Updated)

Denouement (n) -- The unraveling of a plot; a catastrophe....

From Webster's Unabridged Dictionary (1913)

There is something supernally appropriate to the fact that, in order to find the most suitable definition for just right word to describe the ongoing crisis of the financial system, we have to refer to a dictionary published in 1913.

We are now into the second year of the unraveling of the world financial system. It could be described as the Great Denouement (or final act) of a plot that began in 1913, when Congress created the Federal Reserve System, aka the Focus of Evil in the Modern World. So far the effects of the unraveling have had minimal impact on the larger economy.

This is about to change.

Last Friday, there were five globe-bestriding Wall Street investment banks. Today there are three. Lehman Brothers, a 158-year-old financial colossus, is headed for bankruptcy and oblivion. Merrill Lynch, which was following the same trajectory, was bought by Bank of America.

Tellingly, the markets greeted that acquisition by selling off Bank of America shares, despite CEO Ken Lewis's happy prattle about the "synergies" supposedly catalyzed by this buy-out. Likwise, the bank's credit rating took a hit following the transaction. This is exactly the opposite of what we would expect to see when one business demonstrates its vitality by purchasing another. In this case, however, it is well understood that BofA wasn't gaining assets, but rather taking on an infection.

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