FOR the past eight years, the Bush administration has been passionately busy doling out billions of dollars in tax cuts, contracts and subsidies to make the rich richer. At the same time, it was hitting hard the middle and lower classes by denying health care, increasing interest rate on student loans and cutting down heavily on social welfare measures. It has been a nasty rule for a majority of the Americans. An average American not only lost in terms of economic powers, but also personal liberties with state agencies swooping down all around.

And, as President Bush moved into War against Terror, first attacking and nearly destroying Iraq and tearing its social fabric and plundering its oil wealth, it moved quickly into Afghanistan, reducing it into rubble. Now Pakistan, a close alley for six decades is under attack. To state that America was getting politically isolated at the world stage is to state the obvious. Forget the inane remark of Indian Prime Minister Manmohan Singh that “Indians loved Bush very much”, no other leader across the word makes such revered expressions about him.

But now the economic meltdown, depression or whatever name the economists call it is causing irreparable damage. Some four trillion dollars of public money has been already pushed into the bail out the defaulting banks, financial institutions and insurance companies. No one is talking about fixing the responsibility, but every one is keen to grab as much as possible from 700 billion dollars package granted by the American Congress. This sum is equal to what America has spent in war on terror. It is another matter that oil companies have made a rich haul of over 40 billion dollars during the oil price rise and in addition to what they earned through tax cuts, subsidies and new explorations granted to them.

What has caused the current fiscal crisis or is it appropriate to call it a mere fiscal crisis of a few trillion dollars here or there. Or is it failure of the American system, capitalism, and the free market bootees. In particular when it sheds its duplicitous skin and takes to imperialism; invading countries and plundering them.

Some recent events would clearly show this. When the White House brought out its $700 billion rescue plan, its sheer size was meant to soothe the global financial system, restoring trust and confidence. Now, it looks like a pebble tossed into a churning sea. It points to a major calamity in the making. Clamaity is right there. But it is diifficult to swallow the truth.

The crisis that began as a made-in-America subprime lending problem and radiated across the world is now circling back home. They pulled their best to rescue first the mortgage industry, then the investment bank Bear Stearns, then the mortgage finance giants Fannie Mae and Freddie Mac, then Lehman Brothers and AIG, and now the entire financial system. With Europe and the United States deep in crisis, the rest of the world could not help but suffer. The crisis could be a “tipping point” for the developing world.

A drop in exports, as well as capital inflow, will trigger a falloff in investments. Deceleration of growth and deteriorating financial conditions, combined with monetary tightening, will trigger business failures and possibly banking emergencies.

And, capitalist are turing to ‘soocialist model’ of nationalsing the banks with tax payers money. The US government is injecting capital directly into the nation's banks. The French government too is guaranteeing banks' short-term borrowings as well as their deposits.Three of Britain's biggest banks were thrown a £37bn lifeline by the Government as part of a dramatic taxpayer rescue of the UK's banking system. Under the unprecedented package, the Government could theoretically end up owning around 60 per cent of RBS, and 43.5 per cent of the combined Lloyds TSB-HBOS entity.

Leverage is at the heart of the current crises. Over the past 20 years, banks and financial trading houses have so leveraged their assets, including exotic ones such as Collateralized Debt Obligations, that some 18 trillion dollars of marketable debt now overhangs the global financial system like the proverbial Sword of Damocles.

U.S. money center bank, including Citibank, J.P Morgan Chase and Bank of America report leverage of a mere 12:1, but that does not include their off-the-books collateral obligations, which run to many hundreds of billions of dollars in Revolver lines of credit to which they are committed. General Electric financial subsidies alone had to provide $600 billion in Revolver loans, which is reportedly why the Fed had to inject capital directly into the commercial paper market.

The financial trading houses, such as Lehman Brothers, Morgan Stanley and Goldman Sachs had been leveraged at 30:1 prior to the bankruptcy of Lehman Brothers and conversion of Morgan Stanley and Goldman Sachs into banks. Deutsche Bank has leverage of 60:1, and some Russian banks have leverage of over 100:1. In the case of these highly-leveraged European and Russian banks, a decline of just two percent decline in the value of the underlying assets would wipe out all their capital. Given this sky-high leverage, it is hardly surprising, that banks are not extending credit to each other, and that confidence in the financial system has all but collapsed.

Other countries are resorting to same tactics and should be ready to face the same failures.the malary is much deeper and would require a more open approach to understand and avoid repeated despressions. Basic shift from a greedy, no hold barred market capitalist model to a resposnive pro people model.

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