Debt Vomit--
There is a scene in the Monty Python movie, (The Meaning of Life) in which a hugely fat, grotesque man eats an enormous amount of food. He repeatedly vomits, and then explodes after he eats one last tiny dinner mint. It seems as though the economic dinner mint is just around the corner. We are not sure what this little triggering event will be, but Lord knows we have a plethora of dinner mint situations that could cause a massive financial avalanche of debt vomit.
The entire financial system has gorged itself in, "Debt vomit" for the last 40 years. (Getting off the gold standard, abusing the Black Scholes Option Pricing model, excessive dependency on spreadsheets, and becoming enamored with really powerful computers has created a series of predictable accidents that got us into this horrific economic mess.)
To put this in perspective, there is 715 trillion dollars of notational derivatives and debt sitting on top of our planet that is only worth 60 trillion.
We have 10 times more notational risk and debt than we do wealth for the entire planet.
This is like making $10,000 a year and trying to support $100,000 of credit card debt.
We have a problem. We simply cannot pay the interest on the debt.
No economy can grow with all of this debt hanging over it.
The only viable options is: Debt forgiveness on a governmental, corporate, and personal basis.
Failure has to be allowed to rip through the system.
Bankruptcy is not an evil word.
Look at it this way:
In order to have Christianity you must have a hell, and in order to have capitalism you must have failure.
Incentives, and punishment need to get back to equilibrium.
Once we get the incentives and punishments back to equilibrium we'll be fine.
People will begin to realize that they aren't really mad at other wealthy people. Hell, in America we love winners. We love wealth. What we can't stand is CHEATING. We hate cheaters.
A lot of very wealthy people and entities will have to lose an enormous amount of money.
This ends badly for those who are not prepared.
But, this is not the end of the world.
The U.S. will be OK.
We survived the civil war did we not?
After the failure is allowed to rip through the system, our bet is that a reboot will come faster than you could ever imagine.
Right now, everyone is sitting on pins and needles.
The mirrors have been pulled out by the Tea Party and Occupy Wall Street. And no one likes what they see.
The people are finally beginning to wake up to this atrocity.
Grotesque!
We will not perish.
But, we really do need to get on a diet.
No more debt vomit.
Debt forgiveness is our only corner of freedom.
Posted by The BalanceZone Team at 12/28/2011 2:33 PM 
Categories: BZI Observations
Tags: Alternative Investment strategy to modern portfolio theory
Categories: BZI Observations
Tags: Alternative Investment strategy to modern portfolio theory
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