Boys do it. Girls do it. Airlines do it. Even towns, bars, and banks do it.

Lehman Bros. looks like it might do it.

“Lehman Races to Find a Buyer,” says the Wall Street Journal . If it doesn’t find one it will have to do it.

But can our nation do it?

When you can’t beg, borrow or steal the cash to pay your current obligations, you go bankrupt. That’s why the feds stepped in and took control of Fannie and Freddie. The mortgage lenders needed cash. And at the rate of interest private lenders wanted – to protect themselves from the unlikely chance that Mac and Mae might not be able to repay – it looked like they would never be able to get themselves out of their $100-$200 billion hole.

“Imagine that you have a note from a company that is doing poorly,” writes colleague Simone Wapler in the new French edition of MoneyWeek magazine. “You’re afraid, because if the company fails, it won’t be able to pay the note, and then you’ll be in trouble too. But the owner of the company comes and tells you not to worry. He says he’ll bailout the company himself. But knowing that the owner is himself deeply in debt, are you reassured?”

In the present case, the Mother of All Bailouts is underway...and the Mother of the Mother of all Bailouts is none other than the biggest debtor in the entire world. In fact, so great are its debts and obligations that there is no way it could ever repay them, at least not honestly – and everyone knows it.

As to all that, the facts are clear; but beyond the facts we find nothing but guesswork and question marks. As long as people have confidence in the dollar, there should be no problem, right? But how long can people have confidence in the dollar when its custodians are spending it so freely? U.S. government expenses are soaring...just as receipts decline. We already have a deficit of about $400 billion. No one knows how much the bailout of Fannie and Freddie will add, but it could be hundreds of billions.

And if the slump continues, we could soon be looking at a deficit of $1 trillion. Some analysts – notably, Albert Edwards of Societe Generale – are warning against deficits of $2 trillion. Is there no limit to how much the government can borrow? How much it can spend? Won’t there come a point when the dollar loses value...and when creditors get scared?

The answer to those last three questions is: yes. And that is what will make the next few years so entertaining; we’re going to find out how much the United States can get away with before it goes broke.

“But wait, you’re missing something,” says a colleague. “There’s a worldwide slowdown. Just look at Lehman Bros. Liquidity is disappearing, not increasing. That means people need ready cash. And the world’s readiest cash is the greenback. And look what’s happening already. The dollar has risen against the euro by about 15% from its low. Yesterday, the euro fell below $1.40.”

He might have added that when the credit bubble sprang a leak a year ago, it marked not only the end of the credit expansion, but also the end of the whole Bubble System.

You’ll remember how it worked, dear reader; we described it many times:

Americans bought things they didn’t need with money they didn’t have. The borrowed dollars went to Asian manufacturers (and more recently to oil exporters). Instead of flowing back to the U.S. Treasury, accompanied by a demand for payment in gold, as could have occurred before 1971, the dollars backed up overseas. In fact, local governments had to print more of their own currencies to buy the dollars. The result was a huge ocean of liquidity – dollars, yen, yuan, rubles, pounds, euros – which then drove up prices for assets all over the world. Houses, stocks, bonds, diamonds, watches, paintings – everything got lifted up by this tide of easy money. Gold soared over $1000. Oil reached almost to $150 a barrel. And numbskulls paid millions for Damien Hirst’s silly confections.

But last year, someone pulled the stopper. All of a sudden, the world’s liquidity began to drain away. The U.S. consumer is reluctantly slowing down. Not that he wouldn’t like to keep spending and borrowing in the style to which he became so accustomed; but those happy days are over. He’d like to spend...but he has run out of money and credit.

Without that reckless spending, the world’s economy must slow down. Because the liquidity pump – the Bubble System that delivered cash and credit all over the world – has been turned off.

At least...that’s how it looks to us this morning...

*** But wait! Here comes the latest figure for the U.S. trade deficit. It’s $62.2 billion for last month. Unexpectedly large. Looks like the Bubble System hasn’t completely come to an end. The United States is still pumping out liquidity. About $2 billion per day. How long can this go on? Longer than we thought...but not forever.

*** “Lawmakers seek to curb speculators,” was a headline in yesterday’s financial press.

Just as we predicted; the days of laissez-faire are over. According to the news item, three democrats are leading the charge, waving a report that claims that speculators take advantage of trends and actually influence prices. Can you imagine anything so outrageous, dear reader? People guess what direction the wind is blowing and turn their sails to capture it! Then, these unscrupulous buyers and sellers move prices! What do they think this is, a free market?!!! Those last three exclamation points are meant to show you how indignant we are, here at The Daily Reckoning headquarters. Someone should do something! Government should set prices at a level that is fair for everyone...and leave them there.

Well, good for the democrats! Good on you...you three amigos...you champions of the little guy! You heroes of the war against greed!

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.