Why, after the bursting of a massive credit bubble, do losses from defaulted debt go unrecognized? How is that we simply continue to hum right along?
Chris Martenson explains in, "Don't worry, they'll just change the rules":
"Suppose, for the sake of argument, that there is a world in which banks are allowed by their regulators to pretend their default losses simply do not exist. And, even more outlandishly, some of these banks are allowed to sell heavily damaged loans to their central bank at nearly their full original price.
What does "deflation" mean in such a world? Not much, as it turns out. At least from a monetary perspective, because money is not being destroyed at nearly the rate that would be expected or predicted by the size and rate of the defaults.
This is the world in which we currently live. Trillions in probable and provable losses quietly exist, out of sight, on the balance sheets of the Federal Reserve and other financial institutions. If they ever come out of hiding and onto the books, I think the deflationists will be proven correct beyond all doubt..."
Which brings Martenson to his next point: the "extend and pretend" game which favors the "too big to fail" (TBTF) banks is part and parcel of the trend towards changing the rules of the game at will. In this framework, what should happen may not transpire at all, or at least not for some time.
"...The theme here is simple enough: If and whenever the circumstances justify a major response, existing rules will be changed, altered, bent, or broken.
Because of this, I routinely argue that what should happen won't happen, at least not right away, and that there's really no such thing as investing anymore, only speculating -- unless you are a big bank, favored by the Fed, with advance information..."
Check out the full piece to hear why the rules of the game are constantly changing, and why we're all speculators (as opposed to investors) now.
5 comments:
I think Chris is right -- the problem is that the whole idea is terribly depressing and disturbing.
Can we ever break the grip that the 'system' has on the country?
"Can we ever break the grip that the 'system' has on the country?"
Was thinking about that myself, today. Think it will take a broader realization that government has become the people's master, rather than its servant (as originally intended).
Some historically minded people have noted that there's usually a tipping point when people realize that too many resources have been directed towards propping up the elites and their lifestyle, and the rest of society is being flogged to uphold their support structure.
We seem to be nearing a larger awareness of that point now. I wonder if we can somehow alter the course we're on in the not too distant future. What do you think?
I think you're right about us getting near that tipping point. I think the real question is whether or not that 'tipping' can actually be done, and if so, how?
I think the whole 'Tea Party' idea is just a start, and it may take something like that, a third and/or fourth political party that gains some traction and is able to start to 'infiltrate' the gov't. I don't see how else it happens. And I despair in the fact that I may not live to see it. It could take a while, and I hate to see the current 'system' continued for that long. It's doing a lot of damage.
Then again, at the current pace, we're looking at another financial crisis of some sort in the not-too-distant future. If the Fed and gov't try to pull the same stunts as they pulled with this one, there could be rioting in the streets.
I wonder what the tipping point will be as well.
Also agree that the Tea Party movement is probably just an initial stage in a more vocal dissatisfaction with the government and its policies. I believe Gerald Celente has called it an early phase of the "2nd American Revolution".
If that's true, it will be interesting to see how it plays out and over what time frame. Could be a very scary time as well.
Sad to see so many ignorant of what this country really stands for and what the Founding Fathers fought to create & preserve for us. Liberty - a word whose true meaning seems to be lost on those supporting wars of adventure, wholesale spying on American citizens, & endless spending on government programs & bailouts, which often spit in the face of our Constitution.
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