Wall Street's largest banks lost $50 billion, with Citigroup taking the biggest hit at $11 billion. Its deposed Chief Executive Officer Chuck Prince walked away with $100 million in severance benefits. Merrill Lynch, the biggest investment firm, which lost more than $8 billion, fired CEO Stan O'Neal, who had made $160 million over the past five years he had been in charge. His golden parachute added another $160 million.

Many saw the disaster coming but kept quiet as the international Ponzi scheme kept belching huge profits. One leading global umpire, Federal Reserve Chairman Alan Greenspan, didn't throw any yellow or red flags on the plays and admitted after retiring he knew about abuses in subprime lending but failed to foresee their paralyzing effects until early 2006. Greenspan, who led the Fed through 18 years and four presidents, still defends his lowering of interest rates from 2001 until 2004 that critics say caused the crisis in the first place.

The housing bubble was the size of a Macy's Thanksgiving Day parade balloon when Greenspan said in October 2004, "There's a little froth in this market," but "we don't perceive that there's a national bubble." Frenetic bank lending led to The Denver Post's story of a runaway prisoner who managed to borrow enough to buy three expensive houses while on the lam, then bought two more while in prison.

Cheap credit, no money down, led millions to purchase houses way beyond their means. No problem, said mortgage prestidigitators. Real estate would keep appreciating, so why not upgrade with something more expensive. Refinancing was a breeze.

Security markets took over from bank managers and risks were then carved up and camouflaged as CDOs -- collateralized debt obligations -- to look like less risky bonds. Thus, $3.3 trillion worth of paper was collateralized in 2006 alone. West Europeans owned a little over half the amount.

The bubble burst last June and the end of the crisis is forecast with tedious regularity, but the bad news keeps coming as bank after bank here and abroad faces the dirge. The Wall Street Journal reported Nov. 24, "The subprime mortgage crisis is poised to get much worse." We reported this in a Sept. 10 commentary. Interest payments are now set to grow on $362 billion in subprime mortgages, according to Bank of America data. Some 1.35 million homes entered the foreclosure process this year. Another 1.44 million will do so next year, further weakening a straining housing market.

The fear now, reported the BBC World Service's economics correspondent, Steve Schifferes, "is that the whole of the bond market, which funds everything from government debt to company borrowing to credit cards and car loans, will begin to dry up as investors worry about undisclosed problems."

According to Moody's and/or the Federal Reserve, potential subprime losses include $1.3 trillion in distressed mortgages, $625 billion in distressed subprime mortgages and $220 billion to $450 billion in foreclosed subprime mortgages. The current market value of subprime mortgages ranges from $300 billion to $900 billion.

Subprime mortgage bonds issued in early 2007 have dropped in value by between 20 percent and 80 percent, depending on their bond rating.

To fight two wars -- Iraq and Afghanistan -- without any reduction in the U.S. standard of living means borrowing $2 billion to $3 billion a day from abroad, the amount of U.S. paper taken in by foreign central banks. But many of these dollars are now coming back to buy troubled U.S. properties. Some 800 U.S. companies went to foreign buyers last year.

A barrel of crude oil has gone from $60 to $100 and gas at the pump from $2 to $3 in the past two years. While the dollar hit a record low Thanksgiving week (now down 40 percent against the euro), oil surged to a record high. The federal deficit shrinks the dollar's value abroad, which drives up the price of imports and other overseas expenditures. The compensatory boost in cheaper U.S. exports is yet to be felt. During President Bush's seven years in office, the national debt increased from $3.4 trillion to $9.1 trillion.

Foreign governments holding several trillion dollars in U.S. securities are hedging their bets, shifting dollars to baskets of currencies, including the euro, and setting up "sovereign investment funds" to buy hard assets, now much cheaper when priced in dollars, in the United States, Europe, Asia and the Middle East. An estimated $2 trillion to $3 trillion are now poised for action in these "sovereign funds." Investment banker Felix G. Rohatyn says $10 trillion to $12 trillion may accumulate in such funds by 2016.

Qatar alone, with a population of half a million, has earmarked $100 billion a year for foreign buys, or twice as much as the entire developed world gives the developing world. With oil bumping $100 a barrel, oil-rich states like Russia and Saudi Arabia are diversifying by partly decoupling the dollar link.

Yale Professor Robert Shiller, who was the first to call the dot-com bubble and is now the guru for housing prices, told investors and finance experts in Dubai, "Any country that has confidence in its monetary institutions should not peg to the dollar." Only a currency in worse shape than the dollar should bother to rely on it for support, Shiller said. The Gulf Cooperation Council's six members had agreed to establish a monetary union by 2010 with a single currency pegged to the dollar.

Chinese Premier Wen Jiabao, speaking in Singapore, said China now has $1.4 trillion in its foreign exchange reserves, which doubled in two years and are the largest in the world. "Such a massive reserve is both our strength as well as a huge responsibility," he said, "and I tell my friends I have never been under more pressure." China pumped $5.5 billion into the Standard Bank of South Africa. Its 20 percent share of the bank was the largest foreign direct investment in Africa -- ever.

As U.S. stocks wallowed in the doldrums, India's market sizzled (up 30 percent in three months), propelling Anil and Mukesh Ambani, the two brothers who control Reliance Industries (energy, communications) to the wealthiest family in the world -- a cool $100 billion.

The new geoeconomic paradigm is glaringly obvious. Can a geopolitical shift in the correlation of forces be far behind? Our self-avowed enemies are students of Sun Tzu, the Chinese philosopher of war. In the "Art of War" 2,500 years ago, he wrote the supreme excellence in war is not to win a hundred battles on 100 battlefields -- but to subdue your enemy without ever having to fight him.

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