Thanks for your insightful comments. You are among the few who realize that the system is broken and that the government is the problem, not the solution. There will be no good way out of this mess as the politicians will keep trying to transport us all back to 2006 rather than fix structural problems.

Jean Baptiste Say formulated what is known (and universally mis-taught) as Say’s Law. It basically reveals a stark axiom: In order to consume, first you must produce.

Banking today (and for 100+ years) assumes the opposite: In order to consume, you can first borrow. Banking lives this lie first and foremost via the fractional reserve system. When it was small and limited to the cozy cartel of the Federal Reserve System this “free lunch” generally didn’t cause enough trouble to threaten its own existence. Decade after decade the bubble of credit grew, mostly at the Federal government level where political promises were made (ever more generous entitlement payments, etc.) and where pork barrel spending was just layered on previous borrowing. Only the stupid and naive think that political calculation is about one bit more than the next election.

Since the government produces NOTHING it must take every value it spends from some productive person; borrowing or taxing it matters not. Say’s Law could not be violated, so all consumption consumed current production. A cottage industry grew to obscure this fact, and eventually we developed a society where people could borrow and consume without producing anything (enjoying the benefits of that which was produced) and others could lend, believing that they would be able to consume that value in the future.

The future is here…and the value is gone. It was in overbuilt houses and it’s in used Harley Davidson hogs and used Jet Skis and in digested restaurant food. It’s in all the things consumers consumed…and once consumed, rendered valueless.

The bust we’re experiencing is simply a process of revelation. As the manic optimism of the long bull market fades, it is like waking up after the party to discover the person next to you is 1) not your spouse and 2) hideously ugly.

I have to laugh at those who think “the government” is going to “fix” this. As others have written, government is the ultimate “crowd.” It is always the last to book passage on any sinking ship of theory, and because it never faces bankruptcy its managers never face the music for the failure of their policies. Its managers rule by coercion and threat…and anyone who believes that is a successful means of improving humanity’s lot is a moron (and hopefully never has children on whom to practice their beliefs).