It could all be a moot point if China’s real estate bubble is in fact bursting. There is nopt a hope in a hundred that any economy will get through this unscathed and in fact this could kill the current commodity boom (food excepted).

I have no doubts whatsoever that stocks will begin to recede and soon. Monday anyone?

When it actually happens now is anyones guess but to have all three of the worlds biggest economies, the US, Japan and China, all simultaneously facing an uncertain economic future then this will surely drive us all into a global slowdown and recession.

A housing bubble crash in China alone could strip a couple points off global GDP and end what has been one hell of an Asian led commodities buying spree. No way out of this one. I am out now. Goldman was right.

Hi Rick, enjoy your blog and site.

Have you seen this? Tad naive , but it does adress a core issue – honesty.

Top Economists: Trust is Necessary for a Stable Economy … But Trust Won’t Be Restored Until We Prosecute Wall Street Fraud

Most policy makers still don’t understand the urgent need to restore trust in our financial system, or the need to prosecute Wall Street executives for fraud and other criminal wrongdoing.

But top economists have been saying for well over a decade that trust is necessary for a stable economy, and that prosecuting the criminals Is necessary to restore trust.

Trust is Necessary for a Stable Economy

In his influential 1993 book Making Democracy Work, Robert Putnam showed how civic attitudes and trust could account for differences in the economic and government performance between northern and southern Italy.

Political economist Francis Fukiyama wrote a book called Trust in 1995, arguing that the most pervasive cultural characteristic influencing a nation’s prosperity and ability to compete is the level of trust or cooperative behavior based upon shared norms. He stated that the United States, like Japan and Germany, has been a high-trust society historically but that this status has eroded in recent years.

In 1998, Paul Zak (Professor of Economics and Department Chair, as well as the founding Director of the Center for Neuroeconomics Studies at Claremont Graduate University, Professor of Neurology at Loma Linda University Medical Center, and a senior researcher at UCLA) and Stephen Knack (a Lead Economist in the World Bank’s Research Department and Public Sector Governance Department) wrote a paper called Trust and Growth, arguing:

Adam Smith … observed notable differences across nations in the ‘probity’ and ‘punctuality’ of their populations. For example, the Dutch ‘are the most faithful to their word.’John Stuart Mill wrote: ‘There are countries in Europe . . . where the most serious impediment to conducting business concerns on a large scale, is the rarity of persons who are supposed fit to be trusted with the receipt and expenditure of large sums of money’ (Mill, 1848, p. 132).

Enormous differences across countries in the propensity to trust others survive
today.

***

Trust is higher in ‘fair’ societies.

***

High trust societies produce more output than low trust societies. A fortiori, a sufficient amount of trust may be crucial to successful development. Douglass North (1990, p. 54) writes,
The inability of societies to develop effective, lowcost enforcement of contracts is the most important source of both historical stagnation and contemporary underdevelopment in the Third World.
***

If trust is too low in a society, savings will be insufficient to sustain
positive output growth. Such a poverty trap is more likely when institutions –
both formal and informal – which punish cheaters are weak.
Heap, Tan and Zizzo and others have come to similar conclusions.

In 2001, Zak and Knack showed that “strengthening the rule of law, reducing inequality, and by facilitating interpersonal understanding” all increase trust. They conclude:

Our analysis shows that trust can be raised directly by increasing communication and education, and indirectly by strengthening formal institutions that enforce contracts and by reducing income inequality. Among the policies that impact these factors, only education, … and freedom satisfy the efficiency criterion which compares the cost of policies with the benefits citizens receive in terms of higher living standards. Further, our analysis suggests that good policy initiates a virtuous circle: policies that raise trust efficiently, improve living standards, raise civil liberties, enhance institutions, and reduce corruption, further raising trust. Trust, democracy, and the rule of law are thus the foundation of abiding prosperity.
A 2005 letter in premier scientific journal Nature reviewed the research on trust and economics:
Trust … plays a key role in economic exchange and politics. In the absence of trust among trading partners, market transactions break down. In the absence of trust in a country’s institutions and leaders, political legitimacy breaks down. Much recent evidence indicates that trust contributes to economic, political and social success.
Forbes wrote an article in 2006 entitled “The Economics of Trust”. The article summarizes the importance of trust in creating a healthy economy:

Imagine going to the corner store to buy a carton of milk, only to find that the refrigerator is locked. When you’ve persuaded the shopkeeper to retrieve the milk, you then end up arguing over whether you’re going to hand the money over first, or whether he is going to hand over the milk. Finally you manage to arrange an elaborate simultaneous exchange. A little taste of life in a world without trust–now imagine trying to arrange a mortgage.

Being able to trust people might seem like a pleasant luxury, but economists are starting to believe that it’s rather more important than that. Trust is about more than whether you can leave your house unlocked; it is responsible for the difference between the richest countries and the poorest.

“If you take a broad enough definition of trust, then it would explain basically all the difference between the per capita income of the United States and Somalia,” ventures Steve Knack, a senior economist at the World Bank who has been studying the economics of trust for over a decade. That suggests that trust is worth $12.4 trillion dollars a year to the U.S., which, in case you are wondering, is 99.5% of this country’s income.

***

Above all, trust enables people to do business with each other. Doing business is what creates wealth.

***

Economists distinguish between the personal, informal trust that comes from being friendly with your neighbors and the impersonal, institutionalized trust that lets you give your credit card number out over the Internet.

In 2007, Yann Algan (Professor of Economics at Paris School of Economics and University Paris East) and Pierre Cahuc (Professor of Economics at the Ecole Polytechnique (Paris)) reported:
We find a significant impact of trust on income per capita for 30 countries over the period 1949-2003.
Similarly, market psychologists Richard L. Peterson M.D. and Frank Murtha, PhD noted in 2008
Trust is the oil in the engine of capitalism, without it, the engine seizes up.

Confidence is like the gasoline, without it the machine won’t move.

Trust is gone: there is no longer trust between counterparties in the financial system. Furthermore, confidence is at a low. Investors have lost their confidence in the ability of shares to provide decent returns (since they haven’t).
In 2009, Paola Sapienza (associate professor of finance and the Zell Center Faculty Fellow at Northwestern University) and Luigi Zingales (Robert C. McCormack Professor of Entrepreneurship and Finance at the University of Chicago Booth School of Business) pointed out:
The drop in trust, we believe, is a major factor behind the deteriorating economic conditions. To demonstrate its importance, we launched the Chicago Booth/Kellogg School Financial Trust Index. Our first set of data—based on interviews conducted at the end of December 2008—shows that between September and December, 52 percent of Americans lost trust in the banks. Similarly, 65 percent lost trust in the stock market. A BBB/Gallup poll that surveyed a similar sample of Americans last April confirms this dramatic drop. At that time, 42 percent of Americans trusted financial institutions, versus 34 percent in our survey today, while 53 percent said they trusted U.S. companies, versus just 12 percent today.

As trust declines, so does Americans’ willingness to invest their money in the financial system. Our data show that trust in the stock market affects people’s intention to buy stocks, even after accounting for expectations of future stock-market performance. Similarly, a person’s trust in banks predicts the likelihood that he will make a run on his bank in a moment of crisis: 25 percent of those who don’t trust banks withdrew their deposits and stored them as cash last fall, compared with only 3 percent of those who said they still trusted the banks. Thus, trust in financial institutions is a key factor for the smooth functioning of capital markets and, by extension, the economy. Changes in trust matter.

They quote a Nobel laureate economist on the subject:
“Virtually every commercial transaction has within itself an element of trust,” writes economist Kenneth Arrow, a Nobel laureate. When we deposit money in a bank, we trust that it’s safe. When a company orders goods, it trusts its counterpart to deliver them in good faith. Trust facilitates transactions because it saves the costs of monitoring and screening; it is an essential lubricant that greases the wheels of the economic system.
In 2009, Time Magazine pointed out:

Traditionally, gold has been a store of value when citizens do not trust their government politically or economically.
In other words, the government’s political actions affect investments, such as gold, and thus the broader economy.

In 2010, a distinguished international group of economists (Giancarlo Corsetti, Michael P. Devereux, Luigi Guiso, John Hassler, Gilles Saint-Paul, Hans-Werner Sinn, Jan-Egbert Sturm and Xavier Vives) wrote:
Public distrust of bankers and financial markets has risen dramatically with the financial crisis. This column argues that this loss of trust in the financial system played a critical role in the collapse of economic activity that followed. To undo the damage, financial regulation needs to focus on restoring that trust.
They noted:
Trust is crucial in many transactions and certainly in those involving financial exchanges. The massive drop in trust associated with this crisis will therefore have important implications for the future of financial markets. Data show that in the late 1970s, the percentage of people who reported having full trust in banks, brokers, mutual funds or the stock market was around 40%; it had sunk to around 30% just before the crisis hit, and collapsed to barely 5% afterwards. It is now even lower than the trust people have in other people (randomly selected of course).
Prosecuting the Criminals Is Necessary to Restore Trust
Nobel prize winning economist Joseph Stiglitz says that we have to prosecute fraud or else the economy won’t recover:

The legal system is supposed to be the codification of our norms and beliefs, things that we need to make our system work. If the legal system is seen as exploitative, then confidence in our whole system starts eroding. And that’s really the problem that’s going on.

***

I think we ought to go do what we did in the S&L [crisis] and actually put many of these guys in prison. Absolutely. These are not just white-collar crimes or little accidents. There were victims. That’s the point. There were victims all over the world.

***

Economists focus on the whole notion of incentives. People have an incentive sometimes to behave badly, because they can make more money if they can cheat. If our economic system is going to work then we have to make sure that what they gain when they cheat is offset by a system of penalties.
Robert Shiller said recently that failing to address the legal issues will cause Americans to lose faith in business and the government:

Shiller said the danger of foreclosuregate — the scandal in which it has come to light that the biggest banks have routinely mishandled homeownership documents, putting the legality of foreclosures and related sales in doubt — is a replay of the 1930s, when Americans lost faith that institutions such as business and government were dealing fairly.
Economists such as William Black and James Galbraith agree. Galbraith says:

There will have to be full-scale investigation and cleaning up of the residue of that, before you can have, I think, a return of confidence in the financial sector. And that’s a process which needs to get underway.
Galbraith also says that economists should move into the background, and “criminologists to the forefront”.

Government regulators know this – or at least pay lip service to it – as well. For example, as the Director of the Securities and Exchange Commission’s enforcement division told Congress:

Recovery from the fallout of the financial crisis requires important efforts on various fronts, and vigorous enforcement is an essential component, as aggressive and even-handed enforcement will meet the public’s fair expectation that those whose violations of the law caused severe loss and hardship will be held accountable. And vigorous law enforcement efforts will help vindicate the principles that are fundamental to the fair and proper functioning of our markets: that no one should have an unjust advantage in our markets; that investors have a right to disclosure that complies with the federal securities laws; and that there is a level playing field for all investors.
Nobel prize winning economist George Akerlof has demonstrated that failure to punish white collar criminals – and instead bailing them out- creates incentives for more economic crimes and further destruction of the economy in the future. Indeed, William Black notes that we’ve known of this dynamic for “hundreds of years”. And see this, this, this and this.
And when Zak and Knack – quoted above – discuss “enforcing contracts”, “raising civil liberties”, and “reducing corruption”, they are talking about enforcing the rule of law, which means prosecuting violations of the law. Likewise, when they refer to “enhancing institutions”, they mean regulatory and justice systems which enforce contracts and prosecute cheaters.

And when Zak and Knack promote reduction of inequality, that means prosecuting fraud as well. Specifically, as I recently pointed out, prosecuting fraud is the best way to reduce inequality:

Robert Shiller [one of the top housing economists in the United States] said in 2009:
And it’s not like we want to level income. I’m not saying spread the wealth around, which got Obama in trouble. But I think, I would hope that this would be a time for a national consideration about policies that would focus on restraining any possible further increases in inequality.
***

If we stop bailing out the fraudsters and financial gamblers, the big banks would focus more on traditional lending and less on speculative plays which only make the rich richer and the poor poorer, and which guarantee future economic crises (which hurt the poor more than the rich).

***

Moreover, both conservatives and liberals agree that we need to prosecute financial fraud. As I’ve previously noted, fraud disproportionally benefits the big players, makes boom-bust cycles more severe, and otherwise harms the economy – all of which increase inequality and warp the market.
Of course, it’s not just economists saying this.
One of the leading business schools in America – the Wharton School of Business – published an essay by a psychologist on the causes and solutions to the economic crisis. Wharton points out that restoring trust is the key to recovery, and that trust cannot be restored until wrongdoers are held accountable:

According to David M. Sachs, a training and supervision analyst at the Psychoanalytic Center of Philadelphia, the crisis today is not one of confidence, but one of trust. “Abusive financial practices were unchecked by personal moral controls that prohibit individual criminal behavior, as in the case of [Bernard] Madoff, and by complex financial manipulations, as in the case of AIG.” The public, expecting to be protected from such abuse, has suffered a trauma of loss similar to that after 9/11. “Normal expectations of what is safe and dependable were abruptly shattered,” Sachs noted. “As is typical of post-traumatic states, planning for the future could not be based on old assumptions about what is safe and what is dangerous. A radical reversal of how to be gratified occurred.”

People now feel more gratified saving money than spending it, Sachs suggested. They have trouble trusting promises from the government because they feel the government has let them down.

He framed his argument with a fictional patient named Betty Q. Public, a librarian with two teenage children and a husband, John, who had recently lost his job. “She felt betrayed because she and her husband had invested conservatively and were double-crossed by dishonest, greedy businessmen, and now she distrusted the government that had failed to protect them from corporate dishonesty. Not only that, but she had little trust in things turning around soon enough to enable her and her husband to accomplish their previous goals.

“By no means a sophisticated economist, she knew … that some people had become fantastically wealthy by misusing other people’s money — hers included,” Sachs said. “In short, John and Betty had done everything right and were being punished, while the dishonest people were going unpunished.”

Helping an individual recover from a traumatic experience provides a useful analogy for understanding how to help the economy recover from its own traumatic experience, Sachs pointed out. The public will need to “hold the perpetrators of the economic disaster responsible and take what actions they can to prevent them from harming the economy again.” In addition, the public will have to see proof that government and business leaders can behave responsibly before they will trust them again, he argued.

Note that Sachs urges “hold[ing] the perpetrators of the economic disaster responsible.” In other words, just “looking forward” and promising to do things differently isn’t enough.

As Wall Street insider and New York Times columnist Andrew Ross Sorkin writes:
“They will pick on minor misdemeanors by individual market participants,” said David Einhorn, the hedge fund manager who was among the Cassandras before the financial crisis. To Mr. Einhorn, the government is “not willing to take on significant misbehavior by sizable” firms. “But since there have been almost no big prosecutions, there’s very little evidence that it has stopped bad actors from behaving badly.”
***

Fraud at big corporations surely dwarfs by orders of magnitude the shareholders’ losses of $8 billion that Mr. Holder highlighted. If the government spent half the time trying to ferret out fraud at major companies that it does tracking pump-and-dump schemes, we might have been able to stop the financial crisis, or at least we’d have a fighting chance at stopping the next one.

And as a former congressional aide recently said in some of the most colorful language to date:

“You put Lloyd Blankfein in pound-me-in-the-ass prison for one six-month term, and all this bullshit would stop, all over Wall Street,” says a former congressional aide. “That’s all it would take. Just once.”

8 COMMENTS:

jo6pac said…
“You put Lloyd Blankfein in pound-me-in-the-ass prison for one six-month term, and all this bullshit would stop, all over Wall Street,” says a former congressional aide. “That’s all it would take. Just once.

THIS WILL NOT HAPPEN UNTIL THERE IS A REAL GOVT. OF THE PEOPLE IN PLACE IN AMERIKA AND I DON’T THINK THAT’S ANY TIME SOON. SAD

MARCH 7, 2011 5:30 PM
eric said…
As always when the banksters try to foist some scheme that obviously benefits them and impoverishes everyone else, they have probably been making dire warnings and veiled threats that if they are prosecuted, the financial system will go down in flames.

For example, in a post at zero hedge (http://tinyurl.com/4m5k3p5):

“LAWLER (?): If the foreclosure process were to stop functioning entirely that would create some significant problems. Most of the – my understanding of those issues were that the processes were not followed correctly, but if they can be corrected so that they do work properly, then that’s not a systemic risk. If we simply were unable to foreclose on properties, then that could create more serious problems.”

Although Tom Lawler is an (extremely well-to-do) economist and not a bankster, he acts as their messenger. Massive, systemic fraud becomes “processes [that] were not followed correctly,” and rather than put a stop to the fraud, the processes should be “corrected so that they do work properly.” Otherwise there will be “serious problems.”

We should heed the example of Dennis Kucinich, who refused to sell Cleveland’s municipal power company to blackmailing banksters. Cleveland is better off today by far than if Kucinich had capitulated to their dire warnings and threats.

If the system goes down in flames, the banksters and their ilk are the ones that will get burnt. The people need to stop believing them when they say it will be the other way around.

MARCH 8, 2011 8:43 AM
Blurtman said…
Is Obama’s failure to address financial fraud and the true insolvency of the banking system preventing the economic recovery? Is he throwing the unemployed under the bus for campaign contributions?

MARCH 8, 2011 8:49 AM
windcatcher said…
Trust, honesty, and integrity are closely related human traits of good character that has been acknowledged as “good” since the beginning of history.

The opposite human traits of stealing, fraud, cheating, lying, deception, corruption, conniving conspiracy, and extortion, is “bad” human traits and considered criminal in all “short haired monkey” societies.

That crazy David Icke thinks that the global elite are not even human but reptiles! Ha. Ha.

After watching video of Mr. Fink, Clintons, Bushes, Obama, Mr. Holder and others and the peculiar way that they flick their tongues out, I am beginning to wonder if he is not right- maybe they are not human! Ha. Ha.

Native American Indians would say that they “speak with a forked tongue” which oddly is reptilian. Ha. Ha.

As Mr. McGovern yelled at General Clinton as he was hauled away from her phony “Free Press” propaganda release. “So this is America”?

MARCH 8, 2011 1:18 PM
Blurtman said…
“After watching video of Mr. Fink, Clintons, Bushes, Obama, Mr. Holder and others and the peculiar way that they flick their tongues out, I am beginning to wonder if he is not right- maybe they are not human! Ha. Ha.”

See the classic John Carpenter film, “They Live.” You may be on to something.

MARCH 8, 2011 3:31 PM
hungry4food said…
We need to be VERY careful on preserving the Independence of the USA so Free market value can be preserved .

http://www.washingtontimes.com/news/2011/feb/28/financial-terrorism-suspected-in-08-economic-crash/

http://www.rightsidenews.com/2011030312967/world/terrorism/sharia4america-muslims-call-for-un-to-be-turned-into-massive-sharia-court.html

MARCH 9, 2011 10:30 AM
Larry Elford, Visual Investigations said…
I am afraid that if we let these huge, blatant crimes go unpunished, the message to the world will be “crime pays”. We cannot even imagine the repercussions down the road of giving an entire generation the idea that “anything goes”.
They may react with violent anger, or with chaotic selfish disregard for laws. Imagine tax revolts, killings, vigilantism, which they will feel rightly justified in if a “banker and a politician” can “get away” with stealing from the country.
If the government is found out to be in on the crimes (which is true with my own government) then we need to speak up and name them, sue them, and try to jail them. To let them go is to let go of mush of what holds society together, as was mentioned in this blog……trust.
http://www.albertafraud.com for class action to hold power to account

MARCH 12, 2011 9:43 PM
Riff Gibson said…
I’ve devised a solution to the current economic mess that uses the vast financial power of Wall Street to enact a (much) greater good. Here’s how:

I’ve written a proposal that uses entrepreneurship on a massive scale to tackle the ongoing high unemployment problem, which has left millions and millions of Americans grasping at the last vestiges of the American Dream. Long-term unemployment is at record levels and the pace of the tepid “recovery” from the Great Recession will require years to return the country to full employment. In the mean time, government coffers are depleted while straining to address the extreme hardship, and tax revenues are greatly diminished because so many jobless folks cannot pay taxes.

My proposal describes an entrepreneurial mechanism through which we can fund a massive number of new business ventures (to create a massive number of new jobs) by tapping the financial power of Wall Street. It is a private-sector proactive approach to remedy the high unemployment problem. Titled “A Modest Proposal to Save the American Economy: Entrepreneurial Blitzkrieg as Job Creation Vehicle,” the proposal has been published online at Salem-News.com (and various other places):

http://salem-news.com/articles/march232011/solving-unemployment-jpb.php

APRIL 8, 2011 4:29 AM
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Two good thought pieces with many excellent comments on what continues to be of paramount concern: Hyperinflation or Hyperdeflation?
Therefore, the immediate likelihood of stagflation increases…

RR says[Inflation is the “avenue of choice” only for the indentured masses, not the lenders and rentiers. Who do you think will prevail? I continue to believe that mortgage debtors will not simply skip-and-go-naked.] SD1 says [ To my knowledge, no bank has ever made provisions in their lending criteria. So to anyone subscribing to the hyperinflation theory, all I can say is there is nothing I, and millions of other North Americans, would love more than to take $250,000 of worthless, hyperinflated money that we worked a few days to make, to pay off a mortgage that would otherwise have taken twenty-five to thirty years to repay.] I say “they” the bankers have already screwed theirselves…it’s called MERS with the resultant lack of Title……And the belief that the bankers (or however)will not allow hyperinflation……anyone want to explain the phrase “not worth a Continental”

Carol and roger:

Your replies, also to the point about coin debasement, show, that you clearly do not understand the gold standard I was referring to.

I specifically referred to a time prior to 1910, not the pseudo gold standard, with paperr “money” merely “backed” by the metal.

While you will obviously reject this suggestion, because you appear set in your opinions on this, read Dr. Fekete’s many comments on the subject.

The only workable gold standard is one where the metal itself is used as a circulating medium AT THE END of a production cycle.
In that way NO ONE controls the gold, because it is NOT centralized anywhere, as you see it under the “acked-system”.

To Rogers poitn about the quick-accomodation: there is NO need for such an accomodation.
The argument that “there is not enough gold” is a red-herring, because NOT every transaction requires physical coin to settle.

What the system does need:
a) enforcement of laws of contracts on ALL contracting parties (meaning not making one thing a multiple several liability, which is fraud, nothing less)
b) an OPEN mint, the way originally intended by the founders
c) NO legal tender law (which is just another word for a monopoly granted by the state)
d) most important, bills of exchange, the real bill — for its necessary clearing function.

When you have that in place, there is no debasement of coin, and NO Greshams law, because the free-to-chose market actor will reject the lesser “money, the debased one is actually driven out by the good one.
You also have stable, not rising, not falling, interest rate structures. Look at the structure over the time-period I mentioned earlier.

All this puts the power with the people, away from the monopolising elite, and widely dispersed real wealth, rather than simply widely dispersed paper-claims on centrally held wealth, is much more difficult to seize by any authority, foreing or domestic.

All this is pro the little guy, not as you claim pro the hoarding elite.
WHICH IS WHY the hoarding elite has not only fought, but destroyed that system.

Do you know what coins where used in the colonies as currency prior to the revolution?
It was a total mix of coins, Spain dominated of course, but at the free choosing of the market participants.
Had any one of those coins been debased, it would quickly have become known, and all those coins been rejected.

All that was needed was for the market actors to know the content of the various coins (NOT DIFFICULT to do), and to be able to have faith in coin meeting that knowledge.

No as to the bi-metallism advocates, which I had referenced earlier by my cross of gold citation:
They were doing nothing other than advocating for inflation by other means.
It is true that they MAY have been acting in part as a result to perceived gold hoarding, but to any extent that may actually have been true, it was merely a sympton of the by-then ever declining quality of the monetary system.
Those supposed multiple bank-panics back then, were nothing other than banks being caught for fraudulently issuing paper claims, itself a sympton of the lack of enforcement of contract.

Finally, another great observation made by Dr. Katz about gold and stability:
Look at the Dow (including its predecessor indices) for the 30-40 period prior to the real debasement (this about 1910/1920):
It went nowhere, roughly oscillating between 40/50 and 100. Why?
Because only the debasement of money produces speculative return.
In a stable money environment, speculation IS INDEED a zero-sum game, and stocks are for investing, not speculating.
(Investing= gains from the stock’s underlying actual business (the dividend, or yield for bonds);
Speculating=gains from buying low, selling higher)
Even a long-run yield vs dividend structure obtained:
5% interest yield vs about 7-8% dividends, the difference account for the risk premium between the two.

So, conclusion, you both have fallen for the progressivist trap:
You believe you are for something the benefits the little guy / against something the benefits the elite, when in fact the thing you oppose is the thing that hurts the elite.
(The most egregious progressives in the congress for ex. are its wealthiest members, look at Feinstein, Boxer, Pelosi, et al., even Buffet can be heard singing that song)

One other point about my “no one wins” perspective.

Even though no one wins under either scenario, the truth (as I see it) is that the biggest losers will be those who let their fear blind them to the quality of sound judgement.

There can be no denying the fact that circumstances provide us with decision points almost constantly, and my own experience in life has been that I get a positive physiological response to making the right choices, and I get a negative physiological (read: stress-inducing) response to making the wrong choices.

If you are under real stress about what the future holds, then I might suggest that you have a discussion with yourself about the choices that are available to you to correct that condition. I think if you do that with unfailing honesty, then you will realize very quickly the difference between the real value of paper and digital assets versus the value of a quality life being lived among friends, family, and other “real” assets…

I do not fear the future. Take away the purchasing power of all my assets if you must, and I will still maintain their “usage value” until they are pried from my cold, dead hands.

KC: these pyramid schemes already blew up so many times, human history is made of them.
There are even real pyramid games still standing in Egypt.
Granted, this time it is way bigger. But these pyramid games can also TECHNICALLY blow through a deflation. Partial pyramid games also already blew in the USA, 1929, for instance.
No money is just as efficiently destructive as too much money. A sudden global debt-squeeze like it almost already happened is deflationary as the flow of money suddenly arrests; repeat, it would have already almost happened in 2008. Without the FEDs flooding of the markets with almost limitless liquidity we would have been there.
I think Rick believes in the ignition of the derivates bubble, and that this bubble will suck up so much nominal capital that it will be unfloodable and lastly lead to a full, sudden infarct.
Rothchild, Bilderberg, Goldman Sachs and all the others, yea, they call this pyramid game Fractional Reserve System as anything fractional in finances is already moneychanging. Euphemism for a crime, which has obviously socialized itself. Also there is mercantilism and even the cruelest of all pyramid schemes defined by Wallenstein: war feeds on war.
I think almost everyone here understands unspoken that we are all being threatened by a gigantic pyramid scheme. Rick definitely knows that as he keeps reminding us of something we don´t love to be reminded of: the gargantuan derivatives bubble resting on leverage, spell credit, margin, whatever, money someone doesn´t really have if everyone entitled would ask for it. This is precisely why Mr. Bernanke is flooding the markets with liquidity, to fend off a deflation.
And organized crime sits at the top, too. In Italy, they even managed to turn a country into a media-dictatorship.
Then there´s the G7 and G20 mafia and these people have the power to kill. Putin wouldn´t mind killing a Rothchild, no problem.
The population of our planet is a pyramid game: need breads on need.
So the picture is just a tad more complex than a book and two videos.
Some of the grandest leverages of human society came not from banksters, but from good willing scientists, like Justus von Liebig in agriculture and James Watts and Daimler and Ford.
The banksters are a modern discrace, and whether the shadow-banking system is run by sinister organizations or idiots doesn´t really matter, so long as a lack of rule of law even allows for the phenomenon of a shadow-banking system, we haven´t achieved liberty, yet; and no free market or even capitalism; but just as dangerous are forever debt-making politicians, who just wish to be reelected and are not man enough to be the least bit selfless or at least professional in terms of their oaths.
But if the people of America and the rest of the world don´t do anything….

Found an interesting chart of recent price changes:
http://www.ritholtz.com/blog/2011/04/what-is-really-inflationdeflation-items-5/

The dollar has lost 95 percent of its purchasing power since the advent of the Fed. I think that shows exactly what the elites want. I can tell the future: look what’s in your hand. (I can’t stop for nothing, I’m playing in the band. Sorry.) The idea that non-stop inflation creation can not get away from the elites and morph into something more dangerous seems illogical. It has happened many times in the past. Remember Louis XV and John Law. Those were true elites. That said, it’s equally plausible that crushing debt deflation will overwhelm the printing presses. It all comes down to confidence. If the citizens retain a semblance of confidence in the system we’ll have deflation. If not, money will become worthless, then hyper inflation. I think FOFOA explained that quite well.