Today on Reason Magazine, Michael Flynn writes an interesting and straightforward description of how Wall Street has gotten itself into this mess. We all know the basics:

• Cheap Money
• Sub Prime Mortgage
• Mortgage Default
• Undercapitalization
• Bankruptcy / Freakout

But what I didn’t realize is that the most important part of this mess isn’t neccessarily the undercapitalization, but its the uncertainty of the value of those damned Mortgage Backed Securities. It seems that since no one knows what they are worth…banks are forced to write them down to zero.

But they actually aren’t worth zero. Merrill Lynch recent unloaded some of that crap for 22 cents on the dollar…which does to show that, although everyone fucked up on Wall Street, that the sky may not be falling…it might be that we’re just coming down to earth.

Problem is that all of this panic might just make the sky fall…rather than vice versa.