The crashing of America’s giant investment banks is beginning to sound like an Amazonian logging operation.

In quick succession Bear Stearns, Lehman Brothers and Merrill Lynch have all gone south to the lumberjacks. Of the Masters of the Universe, only Morgan Stanley and Goldman Sachs survive.

For how long?

With CDOs (Collateralized Debt Obligations) having poisoned the world’s financial system, like seeping toxic waste, a new danger is now forming on the horizon.

CDSs (Credit Default Swaps — insurance policies for bonded commercial IOUs), which are out there in their billions, are beginning to crumble in the face of massive defaults.

The world’s biggest insurer AIG is already in Lehman-style retreat — its shares plummeted by 70 percent in early trading yesterday — as is the monoline AMBAC. The CDS crisis is now with us. When optimistic Anatole Kaletsky of The Times (London) says we are getting into 1930s territory, you know we have a serious problem.

So what precisely are CDSs and how will their demise affect most of us in coming days, weeks, months and years?

George Soros estimates that the value of CDSs now equals half of U.S. household wealth, an almost unimaginable number, now put at $58 trillion.

CDSs are hedges made by investors in case a company defaults on its debts. In effect you bet on a company failing to protect your investment in the event it does just that.

The problem arises when large numbers of companies go bust and the CDSs themselves become worthless since no-one can pay them out.

A CDS seller undertakes to compensate a buyer if a corporate bond defaults. Since there is no limit to the size of cover taken out, the value of CDSs often exceeds a company’s debts.

Moreover, many CDSs are bought with borrowed money so the infection of the system drives deep into the financial heartland like veins in a blue cheese.

The danger now is debt deflation: a rapid reversal of debt issuance, or deleveraging as it is called.

Tim Congdon of the London School of Economics says, “Banking system capital is being wiped out. The risk is that this could lead to a contraction of credit and set off a self-reinforcing downward spiral, leading to the sort of debt-deflation we saw in the 1930s.

“It is already clear that money growth has ground to a halt over the past three months. We must prevent it from actually contracting. If the Fed and European Central Bank don’t cut interest rates soon, it is going to be a problem.”

The Bank of England’s rigid inflation target, set by Gordon Brown when inflation was low, is now a millstone around Governor Mervyn King’s neck at a time when energy, food and commodity price rises are being imported from global markets.

The Eurozone is similarly caught in a time warp relating to Germany’s neurotic fear of hyperinflation. Add the growing divergence between euro economies and a far deeper than necessary downturn is guaranteed for Western European countries.

America, which is free from those constraints, already has 2 percent interest rates. It is, however, suffering a double blow: the fading of the effect from the summer fiscal stimulus and a loss of export competitiveness as the dollar rises.

What began as bad government, worse regulation, grasping banks, financial structures that lacked resilience because they were built on sand, has turned into a perfect storm that is about to come ashore and swallow much of our familiar financial and economic landscapes.

As we wrote here a year ago, while the current triple crises are different from the 1930s, and may not bite so deep, the damage will take just as long to repair.

When a bubble of such exuberant overconfidence bursts, the fallaway has to be profound before a new wave can summon enough energy to restart the cycle.

What consolations can we find among this heap of misery? As usual Einstein has a thoughtful response:

“We act as though comfort and luxury were the chief requirements of life, when all that we need to make us happy is something to be enthusiastic about.”

Happy enthusiasm.

Gordon Brown, British Prime Minister, First Lord of the Treasury, Leader of the Labour Party, former Chancellor of the Exchequer, has had surprisingly few titles in his long 11 years in government. Some Minsters have managed to accrue almost one a year to embellish their CVs and Who’s Who entries.

Maybe he deserves another to plump out his list, even if it is an honorary gong going forward.

The title I have in mind has been available to him ever since the local elections in May and the loss of London to David Cameron’s Tories. It should certainly have been collected after the disastrous debacle in Labour’s safe seat of Crewe and Nantwich. Now, following yesterday’s cataclysmic implosion in the East End of Glasgow — the very soul of Labour’s heartland — we’re going to pin it on his chest whether he likes it or not.

Her Majesty’s Leader of the Opposition Designate.

Not that he will linger in his new job when his party is wiped out Canadian-meltdown style in the next General Election. You can be sure he will step down from politics the moment he concedes defeat. A son of the manse who built a reputation for pulling rabbits out of hats will find the absence of hats very hard to bear. Latterly, even the rabbits have deserted him.

For Gordon was the man who, as Chancellor, forged a glittering Cityscape of infrastructure to celebrate his achievements. The Golden Rule that borrowing should be for “investment” only, not for consumption. As a man without a moment’s experience of commerce in his entire life, his idea of investment was more, and yet more, state clutter.

His Borrowing Rule and his Financial Regulator were equally flawed. He’s had to send in his chief ghillie to slice them up for breakfast after they all dropped dead at the same time. Gordon’s smoke and mirrors have disappeared in a big puff of smoke.

Like many, I sometimes get a twinge of conscience in seeming so beastly to a one-eyed man who has pursued his partial vision with commendable vigour for so long. Then I recall that his 1970s-style economics was aimed at creating a client state that would, in theory, always vote Labour. The same was true for mass immigration.

The list of betrayals goes on. Signing away the country to a foreign power (as the EU will be after the Lisbon Treaty) against the wishes of a large majority of the British, and ratting on the promise of a referendum. Selling seats in the upper chamber of Parliament, and other honours, for party funding — he denied knowledge of this outrage but no-one believes him …

Eventually you get weary of compiling inventories of Brown’s failings, treacheries, errors of judgement and betrayals of trust. Like many obsessives, he bores by excess.

The electorate has already spoken. Will he go of his own volition? Brown’s tragedy is that he has no hinterland, nowhere else to go. To him, politics and life are one. Even the books he occasionally writes are intended to burnish his career prospects. Silly little tomes about courage, from a man who conspicuously has little of it. He has been labelled “yellow” by his opponents.

But he won’t go unless pushed and the Labour Party doesn’t cut down its leaders. It’s the long stalemate before checkmate.

Rudyard Kipling had a prescient little verse for our Leader of the Opposition Designate:

There’s a one-eyed yellow idol to the north of Khatmandu,
There’s a little marble cross below the town;
There’s a broken-hearted woman tends the grave of Mad Carew,
And the Yellow God forever gazes down.

Cartoon by Peter Brookes

Remember the old song that begins: “Happy days are here again, The skies above are clear again, So let’s sing a song of cheer again, Happy days are here again.”?

You don’t need to be a grumpy old puritan to be thankful that a decade of overindulgence, bubble following bubble, and preening egos fed by Cheshire cat politicians whose every error is concealed by good economic tidings, is finally and emphatically over. But can we really squeeze some happy juice from the remaining husks of our collapsing economies and even Western civilization itself?

You bet we can. We’ll start small — just to get you in the mood.

Andy Wood, chief executive of Adnams, a brewing and hotels business, is quoted thus in today’s UK Telegraph : “… throughout East Anglia we are seeing fewer cars on the roads … That’s just one example. There are fewer people going to pubs and they are also spending on different things.”

Isn’t that what almost everyone has been working towards for years — fewer cars on the roads? And is he hinting at a curtailment of binge drinking, which has become a serious social problem in Britain? Coming from a brewer, that must carry weight.

In England, we were recently informed that unregulated immigration from Eastern Europe, thanks to the EU, and the same from the rest of the world, thanks to the Newish Labour government, would double our population in 30-40 years. Considering our population density is already ten times that of the United States, four times France’s and three times Germany’s, that would be a disaster and leave the country unrecognizable even to its own.

Now the word on the street is that half the East Europeans have left as employment dries up and the exchange rate becomes less favourable for them to send money home. The same is beginning to happen with all immigration as the government tightens up on benefits and entry restrictions, mainly, one surmises, to save money.

Better still, the twin projects of a government lacking coherence and competence, while simultaneously pursuing programmes of social engineering unparalleled outside the old communist world, are now exposed as lethal and highly unrewarding. Gordon Brown, a shambling, frightened figure these days, embodies the imminent death of this unhealthy movement. And it took the collapse of the economy to do it. We may regard that as a small price to pay.

I’m guessing that similar scenarios can be found in most other Western countries. In America, for example, where a liberal-left Presidential candidate has a real chance of victory, will a hard-pressed people vote for an untried, although worthy, man whose sketchy manifesto to date closely resembles Blair’s and Brown’s of a decade ago? Won’t they prefer the experience of an older man offering more of a hair shirt approach to the nation’s finances?

The greatest benefit of recessions is that they shake out the incompetent and the wasteful. Companies that should never have received the support of banks or private equity firms fall apart under the weight of highly-leveraged debt. It causes much hardship, of course, but it brings us collectively back to earth and to honest and careful accounting.

Foolhardy projects, like the euro-currency zone and the EU constitution, are revealed for what they are: the expensive fantasies of puffed-up politicians. They may just survive, unfortunately, but they will not be taken seriously in future, and the likelihood is that they won’t exist in ten years.

And what of all those little luxuries we’ve got used to during the past decade of higher disposable incomes? I always did prefer a measure of ebony tea in a cracked mug to a latte in a supercool coffee shop.

We may have had access to all manner of entertainments across a dizzying array of platforms, but in our exuberance we just didn’t notice that most of it was not very good.

Let’s face it, the good times are only really great in retrospect. As one who lived through the 1980s boomtimes in London, I recall them with some relish. On closer inspection, though, I can dimly remember the frustrations and problems too. What on earth did I do with all that money?

As a certain French general used to say, every weakness in your position can be turned to your advantage. That’s the spirit in which I approach the coming era of austerity.

How about you?

Have you noticed how the word “quantum” is everywhere now? It’s hard to find an intelligent publication these days which isn’t going quantum in a big way — if that isn’t a contradiction of terminology.

Copywriters could have a lot of fun with slogans like : “Go large, go quantum.” However, it’s not easy to see how quantums have a part to play in the real world, apart from the trendiness of the word itself.

Quantum mechanics is the newest fad in science, with its magical mystery tour of the universe that must owe a lot to Dr Who.

Upcoming computers will be quantum machines that run 1000 times faster than the trendiest current Mac or Vista PC. We’re persuaded that teleportation will at last be possible with them.

Okay, you go first. I may try it when you return with all your organs intact.

Nanotechnology, which uses quantum techniques, is invading every part of us from our clothing to our bodies. Why doesn’t anybody tell us that?

No learned discussion of the latest science is complete without a deep dive into the sub-atomic world of quantum fantasy.

And, to ram home my point, the latest James Bond flick — far distant from the world of Ian Fleming — is called Quantum Of Solace, a title clearly chosen more for its resonances than its meaning. It would be a better description of the atmosphere in 10 Downing Street right now. Although Gordon Brown requires more than a mere quantum of solace.

It’s as if the big, solid cosmos of the universe is now less interesting than the smallest of the small where the laws of physics are very different and weirdly unfamiliar.

I’m tempted to change the name of this site to Quantum of Syntagma, just to get into the flow, of course. I’ve decided against it because the word is just too small to do us justice.

The European Union could certainly find a use for it though.

Despite the spate of negative results in referendums on aspects of the European Union, the EU Commission and its heavyweight political supporters have not given up on their main aim: to convert the EU into a single country.

The currently proposed constitution — now called the Lisbon Treaty — would turn a grouping of nation states into a legal entity in its own right with the power to sign international treaties on behalf of member states and the right to overturn any nation’s laws. It includes an embryo army poised to requisition the forces of any EU country worth having, a flag, a “national” anthem, a passport system and the beginnings of a diplomatic corps with its own embassies around the world.

All it needs is a name.

The European Union is largely operated for, and on behalf of, Germany and France, the two original founders. What they want, they tend to get. In the treaty after next, assuming they find a way to browbeat Ireland into accepting most of the Lisbon Treaty, the question of the name of the new country of Europe is sure to figure. What might it be?

It would have to satisfy the egos of the Germans and the French and be mildly acceptable to the rest. One obvious name stands out: Frankia.

France was originally named after the Germanic tribe, the Franks, which gave us Charlemagne and other worthies of the “Holy Roman Empire”. It’s a name that would flatter both Paris and Berlin, and emphasize their status as joint controllers of the new European empire. The former French currency, naturally, was the franc.

The British would hate it, of course, and, assuming Labour governments are a thing of the past by then, would probably withdraw.

But would, say, a David Cameron government have the moral force to renegotiate Britain’s terms along the lines of an association agreement? Matthew d’Ancona has an excellent “testing the waters” piece in today’s Telegraph on what Cameron can expect on becoming PM in two years from now. One of his most important points is that serious challenges bring massive opportunities for radical change.

Cameron will certainly be faced with the kind of economic reconstruction that Margaret Thatcher tackled so fearlessly in the early 1980s. She succeeded in transforming Britain from basket case to Anglo-Saxon Tiger in less than a decade.

I’m not going to recite my own shopping list of what a new British government needs to do, as it’s way too long. But lancing the European boil is absolutely essential for British independence and for unity in the Tory party. It would also allow the country its familiar role as a freebooting trader again, free from the paralysing regulatory environment and toxic cost base spewing out in all directions from Brussels.

Frankia, in any shape or size, is no longer in Britain’s national interest. David Cameron may just become the saviour of the nation, a Winston Churchill for the 21st century.