A CNN report on Wall Street's freefall, in which a top trader says "How big's the graveyard? We don't know."

Between one and two trillion dollars - that's what Kenneth Rogoff, professor of economics at Harvard University and former chief economist of the International Monetary Fund, thinks the financial crisis will cost American taxpayers. He writes in the Financial Times:

Were the financial crisis to end today, the costs would be painful but manageable, roughly equivalent to the cost of another year in Iraq. Unfortunately, however, the financial crisis is far from over, and it is hard to imagine how the US government is going to succeed in creating a firewall against further contagion without spending five to 10 times more than it has already, that is, an amount closer to $1,000bn to $2,000bn.

That's a massive increase, and it's going to effect everyone somehow.

A large expansion in debt will impose enormous fiscal costs on the US, ultimately hitting growth through a combination of higher taxes and lower spending. It will certainly make it harder for the US to maintain its military dominance, which has been one of the linchpins of the dollar. The shrinking financial system will also undermine another central foundation of the strength of the US economy. And it is hard to see how the central bank will be able to resist a period of allowing elevated levels of inflation, as this offers a convenient way for the US to deflate the mounting cost of its private and public debts.

"Rising interest rates and a rapidly devaluing dollar" are going to hit all of us, in loan repayments and in rising costs for imports - meaning a far more expensive weekly grocery bill as well. And all of this means John McCain's budget - with tax cuts and rising military spending - is absolutely unsustainable while even Obama's figures must be revised.

As much as it pains me to say it - because the taste of corporate socialism as a reward for corporate robbery is so bitter - I believe that the US and other governments must do what they must to save us all from the excesses of “laissez fair” financial markets that were self-rigged in favor of a few insiders out to asset-strip and make hay while the sun shone. The alternative is too horrid to contemplate. Take AIG - it is inextricably bound through investments with Lloyd's of London and other international big fish. It the Lloyd's/AIG pairing were to have collapsed, the international finance system would have also collapsed, beyond repair - not so much from actual losses as from perception of irremediable weakness. I don't think it would be hyperbolic to say we'd have been looking at a financial wasteland with costs ultimately born be each of us far in excess of $2 trillion.

Over at Economists for Obama, though, they're looking for a thin silver lining even while being dpressed about prospects for one:

it means the next president will face highly constrained choices. At the same time, I've been wondering if the crisis sets the stage for Obama to be a transformative president in the mold of FDR. If the crisis gets to the point that many people feel it in their everyday lives--and I think it will--there will be demands for government to restore trust in the system and strengthen the frayed social safety net, e.g. through universal health care and modernized regulation like that Obama has called for repeatedly, most recently in yesterday's speech. My worry is that Obama will step into the White House facing loud calls for the government to take a greater role but will find the crisis has left the nation's finances in tatters and without the resources to respond to those demands.

UPDATE: (Nicole) The Agonist: Hypocrisy Replaces Bull As Symbol of Wall Street