Saturday, January 2, 2016


The Big Short folks have got back together for an update, and here are some points:
The people who brought us the Crash of 2008 profited from it rather than being punished, a replay of the dot-com bubble and crash. It is always “ the little guy” who pays. At the same time, even the little guy needs to take responsibility for falling for the blandishments of snake oil salesmen.
Exactly!  When the next wipe-out happens, countless will be unemployed and angry.  But the problem was self-inflicted and all unemployment is voluntary.  It is going to be ugly when it could get better.
The free money ( for Wall St.) interest rate policy  “broke the social contract” that had existed for generations and encouraged people to work and save. There really is no such thing as “ free money.” Somebody always pays, in this case small investors and Main St. businesses. Government is creating the very economic inequality it claims to deplore.
Unfortunately, note he objects to calling it free and not object to calling it money.  It's neither free, since it is enslaving debt, and debt is not money.  How will anyone figure out what is going on, let alone happened, if they do not use proper terms?
Risk cannot be priced without market interest rates, so the economy is floundering without reliable road markers.
These are capitalists.  As rent-seekers they are always looking for the big short, the main chance.  They believe in risk (a concept pushed in by bankers who had credit to burn). In business, people avoid risk, usually even in capitalism (hence so much insider trading) and always in a free market. They forget the free market has its own sets of signals, called prices.  There is no price signal via interest rate in a free market because there are no interest rates (outside of the unethical).  In a free market all goods and services are accomplished without interest.

This crack-up is going to be a tremendous opportunity.  I recall in Seattle circa 1971, "Last person to leave turn out the lights."  Within a decade it was booming with inflation, pro-big biz.  Back then the right move was to buy real estate.  A buddy of mine cooked in Alaska summers and bought and refurbed houses winters.  He is a multimillionaire, as a fish processors' cook.  He knew what to do. The next 40 will be deflation, pro small biz.

The next move is to replace, rebuild the USA gone.  Small business.  It's the only safe place.

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