Cascades.

In the midst of this global crisis, with reports coming every minute detailing more bailouts, more capital raisings and more shareholder-dilutive measures by once impregnable and "safe" banks, etc., its a good idea to stop and imagine you are a bird (or a satellite) and gain a larger perspective. The battlfield looks mightily different from the participant and the general.

This is the first macro-level test of the global financial markets. There are no "bi-laterals" in the present case. The entire world is committed to solving the problems that untold billions in cross-holding derivatives contracts make.

So, on one had, we have the fiancial system to thank for increasing the security around the world. When countries experience increased standards of living, they are loathe to disrupt the system. Countries are cooperating together on unprecedented levels in order to preserve the international financial architecture. Unfortunately, the crisis is also exposing not only the weakness of modern U.S.-style capitalism, but also puts into stark relief the difficulties other countries have in investing their capital given weak domestic demand.

On the other hand (channeling Truman's quote about economists and hands), the global economy is searching for answers and transparency. The same country that provided the world with the magic of derivatives that promised to spread risk to ever more diluted destinations will also serve as the leader coming out of this mess. This has been a consistent theme on this blog...slashing and burning with write-downs, misguided legislative action, general shaedenfreude, etc. is a preferable environment to sticking one's head in the sand.

The phenomenon of "capital flight" obviously is seeking to flee from something. The U.S. will remain the premier destination for capital in a world that has is experiencing a global crisis that shows the true metal of institutional power among various competing destinations.

Now ask: Given you were a foreign holder of capital, what jurisdiction would you pick to place your funds?