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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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From: koan12/25/2008 4:02:37 PM
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How I see this mess:

A toxic formula was created during the last eight years: no government (remember Reagan: "government is not the answer, it is thre problem) and no rules, combined with the Ayn Rand "pure capitalism" ideology (Greespan was a worshiper of it and recently did a mea culpa) combined with 1% free fed money, and repeal of Glass Steagall, legislation to prevent regulation, leverage going from 12 to 1, to 40 to 1 and more with CDS insurance and all appointments made to emasculate government programs of oversight e.g. SEC.

Wall street started gambling with no rules at all and with 40 to 1 + leverage, cheap and easy to get money to gamble with and engaging in blatant fraud e.g. Moody's taking CCC paper and calling it AAA paper.

Banks stripped out the CCC paper and put them in CDO's, Moody's rated them AAA paper and they sold them around the world. And they even gambled with trillions of CDS's thinking what easy money getting these insurance payments.

The Wall street gamblers lost 10's of trillions in this gambling, and that loss is now bringing down the world in a massive deflationary depression caused by debt not being backed up by goods and services. This is what caused the great depression. Another house of cards of debt without corresponding collateral e.g. companies with no assets except the stock of other companies.

NO one knows what to do now, or where this is going. But the only failure was the failure to follow our consitutional structure of checks and balances. All laws, rules and regulations were seen as inherently bad. And so no one who believed in regulations was given power.

And per "The Black Swan" no one will be able to guess the economic landscape for Dec, 2009. We need to know that. And we need to take action based on economic science and not ideology.
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