"Bubbles develop when a glut of capital ends up chasing increasingly scarce
assets." This is the way economists talk, because it sounds like some sort
of laws of physics is in play. In reality, economics is about interacting human
psychologies. Bubbles are an emergent phenomonon. And finance people hide
their activity until disaster is at hand (like Bear Sterns did). So we will
know of the next disaster when it is too late. In addition, financial firms
have the equivalent of MLB all-stars, while the regulators are pretty good
members of double-A ball clubs. So the situation is biased against us.
dudd-frank was supposed to end too-big-to-fail. It did not, it further
entrenched it.larry summers refused to regulate derivatives in 1997.
does BO really think he'd be a good candidate to head the fed with that
record of miserable failure?
This is a thoughtful and well written article. In essence he says: Beware
another financial crisis looms. Unfortunately, he offers few recommendations on
how to position yourself or your assets. It would be interesting to read his
specific recommendations.The implications are: Live simply. Avoid
debt. Marry, love and bless and be true to each other (it is a source of joy).
Do not speculate. Learn all you can. Plant a garden (or support a community
garden). Learn a little more. Be self-sufficient as you can and work with
others in your community to do the rest. Keep learning. Invest in alternate
means of energy production. Research and think. Set aside an emergency supply
of core necessities. Ponder how to rotate it. Make room for prayer.
"There are no simple answers." Eric J. WeinerI have to
respectfully disagree. It would have been much cheaper (for the U.S.) to let the
"too big to fail" fail and pickup the pieces afterwards. Saving big
banks from their corporate boards' stupidity is not what the Federal
government should be doing.If I fail, nobody is going to save me
from bankruptcy. Why should multi-billion dollar banks be any different?
The underlying issue is that our money is worthless. There was a time when bank
savings had some value. Now a long-term instrument like a CD pays 1% or so.Saving is for suckers, they say. Bonds? Well, with QE programs they
aren't much better. You are competing with the Fed as they dump $85 Billion
into the market each month.And that drives investors into stocks. Stock
values are manipulated by market moving news, not the value of the products the
companies sell. Such a plan resembles Las Vegas or the lottery.Loaning
money from one bank to another is done at 0% interest.Ergo, our money has
no value.The dollar as the world's currency is vulnerable. And if it
loses stature it will impact our nation is untold ways, beginning with the
interest we owe the world for our debts.
The next one is the gold bubble bursting.
Say No to BOI wondered why the stock market seemed to be doing so well in
spite of a dangerous economy. No other place to put money and hope to earn any
interest or profit today except the market. And as you pointed out, that is a
big gamble as stocks change depending upon the news. Eventually this country
will roll snake eyes. But of course it will be Bushs fault.
Read Terra Nova's post. Priceless.Whenever the economy is
artificially manipulated either by fiscal or monetary policy, it is ripe to
implode. That would be the situation now.We would have been much
better off to let the big banks and big auto fail, or go into bankruptcy and
re-organize or be parceled out to smaller concerns, than to artificially shore
them up through bailouts. We still own GM. The emergent economy would be more
based in reality, more stable, and more cautious about rolling the dice, which
is what we are all doing right now. And personally, I don't trust the
dealer in this high stakes game.Full disclosure: I have a BA in
Economics, 1987, Cum Laude.