Lehman Brothers (NYSE:LEH) and Merrill Lynch (NYSE:MER), two of the biggest financial giants in American history, have just collapsed on the same day. And they are just the tip of the iceberg. There is no end in sight.

The crucial bipartisan national necessity right now is to restore the fiscal credibility of the U.S. government and of the American financial system. Neither the Republican Executive Branch nor the Democratic Congress hitherto has shown the slightest understanding of what this means.

It involves letting interest rates rise in the short term to levels that have not been seen in more than a quarter-century. Otherwise, the crisis will become far worse and the dollar could become worthless. The specter of hyperinflation far worse than anything experienced in the 1970s is far closer than anyone in the country or in the Washington political and policymaking community dares to think.

Lehman declared bankruptcy; Merrill had to sell itself to the Bank of America. Hard times are finally coming to Wall Street, which for so long was immune to them even as cycles of boom and bust transformed the rest of the United States. Thousands of job losses have now been predicted in other Wall Street firms; overseas market losses are being measured in multiple percentages, and Wilbur Ross, the founder of W.L. Ross and Co., has predicted up to 1,000 bank failures in the next few months.

None of this was necessary. All of it is a consequence of the expansionist, low-interest-rates-at-all-costs, "spend as if there was no tomorrow" childishly optimistic policies that U.S. President George W. Bush and his retained-for-far-too-long Chairman of the Federal Reserve Alan Greenspan have inflicted for the past eight years on the U.S. economy.

Bush, the first U.S. president ever to graduate from both Yale University and the Harvard Business School, was all set to let his successor be saddled with blame for the deluge, be it Republican presidential contender Sen. John McCain of Arizona or Democratic nominee Sen. Barack Obama of Illinois. But with a fine sense of historical inevitability, the Perfect Storm has hit instead on his watch.

Neither McCain nor Obama had any sense this was coming, to judge by their election rhetoric. But both of them are going to be judged by the American people and by history on how they respond to it.

Forget the ridiculous rhetoric that has been spewed by countless Bush spinmeisters about how wonderfully history will judge Bush compared with his contemporaries. Those pipe dreams have just gone up in smoke. If Bush breaks even with Herbert Hoover in presidential failing grades, he'll be lucky.

Normally, this situation should benefit the Democrats tremendously. Franklin Roosevelt, after all, built the great 36-year ascendancy of the Democratic Party on his response to the catastrophe of the Great Depression after Hoover's incredibly stupid combination of wild tax increases and wage and price freezes only served to make it far worse.

But Obama has boxed himself in with ridiculous and almost demagogic pledges to slash taxes for 95 percent of the American people and to invest $150 billion he doesn't have in a wild science-fiction quest to create alternative technologies to coal, oil and nuclear power when those pie-in-the-sky technologies don't even exist yet.

Obama needs to do a public U-turn -- speak straight talk to the American people and actually listen to former Federal Reserve Chairman Paul Volcker, who previously he just had on board for show.

McCain needs to face the same tough truth that this is not the time for him to dangle potentially catastrophic tax cuts in front of the American people. But at least he has a real reputation for opposing many, though certainly not all, pork-barrel programs during his decades in the Senate and vowing to slash government spending. In the months and years ahead, having real credibility in those areas is going to be crucial.

Forget the Bush administration's ridiculous hairsplitting rhetoric about the country not being technically in a recession, let alone a depression. The wolf of hyperinflation and international collapse of confidence is no longer at the door, it is roaring through Wall Street and George W. Bush's White House, devouring everything in sight.