I have never forgotten the claims made by Osama bin Laden in one of those early "videotaped messages" that followed 9/11 with some frequency that the way to beat the United States was to force it to bankruptcy. CNN covered the claims in this November 1, 2004 article.
It pissed me off, because surely, we would have learned from the experience of Russia in Afghanistan. Surely, we would bring all the terrorists to justice, Afghanistan and Iraq would quickly reclaim control, even if we should never have attacked Iraq in the first place. We would never be bankrupted by a pack of armed thugs, would we?
Well, it turns out not all the thugs were armed.
Up until the shit hit the fan and splattered the derivatives-based,house-of-cards-financial sector of the economy bringing it tumbling down, Bush's war of aggression was the most obvious risk to our financial security. Surely, when the Dems won Congress in 2006, we would use the power of the dwindling purse to begin to seriously withdraw from Iraq. Right? Naaah.
We knew by March 17, 2006, months before the Dems regained majorities in both houses of Congress, according to this MSNBC article that we had already surpassed what White House economic adviser Lawrence Lindsey offered as an
"upper bound" estimate of $100 billion to $200 billion in a September 2002 interview with The Wall Street Journal
...wildly surpassing the cost Rumsfeld claimed in January 2003 as
"a number that's something under $50 billion"
after Lawrence Lindsey was dismissed in a late 2002 personnel shakeup.
Also from the MSNBC article:
William Nordhaus, a Yale economist who published perhaps the most extensive independent estimate of the potential costs before the war began, suggested a war and occupation could cost anywhere from $100 billion to $1.9 trillion in 2002 dollars
So, two full years to the day before the Bear Stearns Bailout we knew of a serious independent analysis that seemed more accurate than anything the government had published (and stood by), and that number was huge. Still, the economy could deal with it, we hoped, as we worked to regain control of Congress.
However, Pandora's Box had already been open for nearly seven years in the form of the Gramm-Leach-Bliley Act of 1999. It repealed key sections of the Glass-Steagall Act that limited risks banks could take.
The resultant Bankers Gone Wild made for some big-assed houses in the suburbs surrounding NYC as everyone with a hand in the game seemed to be making money hand-over-fist. It also made for rising piles of credit derivatives on many, many companies' balance sheets. This, even after Orange County, California had gone bankrupt (caution: PDF) after investing in "risky Wall Street securities" a.k.a. derivatives, in 1994.
You would think that over-investment in risky Derivatives would be avoided since there had been a very public implosion and bankruptcy directly attributed to such over-investment... but you would be wrong. This is an excellent article on AIG's collapse and it includes a fantastic overview of Credit Derivatives and how traders profited from them if you're still wondering...
The ego-maniacal narcissistic self love fest (to be superlatively redundant) that is Wall St. drove our economy to the edge of the cliff, having been enabled by the complicit 106th Congress, a corporatist administration, and an overwhelming culture of greed.
As they piled on the debt that exceeded the Gross Domestic Product of all the world's economies combined, they created a perfect storm, adding to the enormous economic burden of the war. It's not like we have much of an economic base to fall back on, either, since 4,000,000 manufacturing jobs have left the US since 1994.
Perhaps Congress' stunning incompetence will still snatch bin Laden's victory away from him as they cave to Bush, agree to pay trillions of dollars (no more than $700 billion at any one time) for garbage commercial paper from the balance sheets of companies run by multimillionaires, and force the country into bankruptcy.
Heckuva job, Nancy and Harry. Heckuva job.