Goldman Sachs is clearly “on top of the world” just like the papers say. The financial industry dominates the universe. And its masters report for work at Goldman. And yesterday, the master of the masters of the universe was confirmed by the U.S. Senate as master of the U.S. Treasury Department.

God is in His heaven. Goldman is in the Treasury. All is right with the world.

But we are full of question marks. When a company is already on top of the world, where does it go next? And what kind of world is it that a company such as Goldman would be on top of?

It is a world rich in ‘ations’ we notice: financialization, globalization, securitization, and derivatization. The words are big and new. But the ideas are old and common. In short, it is a world that favors money shuffling and debt over making things and saving money. After all, George W. Bush did not ask the president of General Motors to take the highest financial post in the country, secretary of the treasury. No, he turned to the alpha firm of the whole slick skulk, the “biggest hedge fund in the world,” Goldman Sachs.

Has an important financial deal been done in the last five years without Goldman’s fingerprints on it? Is there any bond, mortgage, or I.O.U. in all the world that does not mention Goldman somewhere in the small print? Is there any speculation, derivative, or trade that Goldman has not done to excess?

No? That’s why the New York firm is practically a living legend. Its innovations, connections, and ambitions helped turn America into Speculation Nation. And now, the credit bubble that Goldman helped to create threatens not only the world economy, but Goldman itself.

In the whole dark night of history from the beginning of United States of America to the dawn of the 21st century, the nation accumulated $ 5.7 trillion in gross federal debt. Six years into the sunny day of the next millennium — it is hardly even time for breakfast — and now the figure is half-again as much. In those same first years of this century, U.S. mortgage debt rose by an additional $3 trillion, much of it in diabolical ARMs (adjustable rate mortgages), where payments go up after the teaser rates expire. Nor is all that money used to buy houses. “Equity extraction” rose to more than 9% in the third quarter of 2005.

Meanwhile, Goldman’s worldwide trading has helped stimulate and facilitate insolvency at home and abroad. When a big corporation — or even a sovereign nation — wants to borrow money, to whom does it turn? Goldman, of course. This trillion-dollar trade in debt has helped the United States fund a current account deficit equal to 7% of the GDP. And it lured the world’s richest nation, with a modest net asset position with the rest of the world, equal to 5% of GDP in the ’80s, to become the world’s biggest debtor, with a negative net asset position equal to 20% of GDP.

And now, the U.S. householder faces a double problem. Interest rates are rising. And so are his mortgage payments. More than $1 trillion worth of ARMs are scheduled to be ratcheted up this year. And another $1.7 trillion next year. Plus, the government, which also funded its spending with short-term financing at low rates, now must refinance trillions worth of its bonds at higher ones. “George Bush has the biggest ARM in the world,” says Niall Ferguson.

No wonder they called Hank Paulson to the U.S. Treasury Department.

u2022 “Homes sit on market,” says CNN.

“Home prices cut as once-torrid U.S. market turns chilly,” adds Bloomberg.

And here comes Reuters:

“The U.S. housing market is now tracing a clearly downward trajectory that economists say will steepen as interest rates rise, raising chances of a recession by early 2007.

“Merrill Lynch economists say there is now about a 40 percent chance of a recession in the first half of 2007 — even without a widely anticipated 25 basis-point Federal Reserve rate hike this week.

“As much as half of U.S. economic growth is now directly or indirectly related to housing sales, construction and consumer spending fueled by home equity extraction, said Sheryl King, senior economist at Merrill Lynch.

“‘If that stimulus is withdrawn, it provides a notable danger to economic growth,’ she said. ‘The higher the interest rates go, the higher the chance that the housing market cools more abruptly and you get an outright decline in home prices.’"

u2022 And a letter from a Dear Reader:

“I envy the fact that you choose to live in France and England. I envy the fact that you can afford to own property in Latin America (Nicaragua I believe and also Argentina). I envy the fact that you can still buy gold.

“But, Bill, I feel sad for you also.

“You seem to have lost the sense of home. You have lost the sense of family, neighborhood, roots, values.

“Instead of staying in America with your roots, family, neighbors, and fighting to defend the ideals your nation was founded on, you chose to leave and pontificate. Shame on you. I will suggest that you are a coward.

“I will stay here in the bunker with the Mogambo Guru. I will stay here and I will adapt to whatever is. But I will not abandon my country, nor my family (extended)…nor my town and neighbors.

“I feel sad for you, Bill, in that you seem to have put yourself ahead of so many other things that are important. Good luck in your selfish endeavors.”

u2022 We reply:

OK, you stay in the bunker. While we appreciate your concern for our emotional state, we are happy to report that all is well here.

But let us ask you a question: How do you think you got to America in the first place? Was it because your ancestors were too cowardly to stay in Ireland, Germany, England or Italy? And what about those who leave from India, China, or France, today, to make their homes in America? Are they cowards, too? Is that the problem with everyone who doesn’t stay put; does he or she lack backbone?

“Where freedom is, that is my country,” we’ve always believed. Americans used to be a restless breed, always searching for greater freedom, greater opportunity, and a place to have a smoke. Your ancestors probably left the old world because they were looking for something better — a place where they could mind their own business, earn a living and find happiness in their own way. But now that the country has become the homeland of a vast decadent empire, with an agenda of its own, we have to ask ourselves: Where should real Americans live? Where is freedom now? Where are opportunities?

There are no sure answers to those questions, but we find some of the most appealing of our countrymen outside of the country. It is as if they had left so that they could continue living as Americans should — by their own wits and their own wills. In many ways, they are the best Americans. In some ways, they are the only ones left.

Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis.