Thursday, May 6, 2010

The Ponzi died for a few minutes today (Dow -1000)

That was amazing today, watching the dow plunge 1000 points in 20 minutes. Reminded me of late 2008 when the Ponzi first started to die.

4 reasons for the market plunge
(1) Greek debt crisis spreading
(2) Financial reform and ending of too big to fail
(3) trading glitch from proctor and gamble and 3m.
(4) The high frequency trading desks selling/put buying/ shorting at milisecond speeds

The market thereafter rebounded and closed down a good -350. The talking heads in the media are pointing solely at the trading error. Nevertheless, the ponzi was dying at a rapid pace. The fact that so much wealth can disapear within minutes shows how unstable the system has become. Ive blogged about this before and will continue to blog until the Ponzi dies (the monetary system is unstable).

Greece has 300 billion in gov debt outstanding, with about 150 billion of it sitting on European bank balance sheets. If/when Greece defaults these banks take a loss which causes american banks to take a loss and the ponzi dies. Of course, the powers that be wont go down without a fight and the ECB (european central bank) will fold its hands and buy buy buy as much gov debt as it can preventing the death of the ponzi. This will only be another temporary fix but the ponzi demands more work, more money, more production, more debt. In the end this will all end with a inflationary holocaust around the world.

Many see the collapse of the current system as a bad thing but i welcome its demise. The sooner the ponzi dies the better for all of humanity. We are all more or less enslaved to digits on a computer screen, with these digits representing money, or "wealth" that is created out of thin air. Of course, borrowers in a healthy system can use the digits to create wealth or loss if mismanaged. However, when the ratio of digits to actual wealth is so large it becomes impossible to service the digits and we all go broke eventually. The crash of 08 was the begining of the correction, the death of the ponzi. However, because the powers that be created more digits to bail themselves out, the ponzi only got bigger. Thus, the wealth disparity continues to grow wider.

Whats happening in Greece will eventually happen to other industrialized nations. People are slowly waking up to the ponzi. We here in America are completely and totally enslaved to the ponzi, with household debt close to 100%, with federal debt at 93% and rising rapidly and total debt at 375% of gdp. How much longer to will we continue to be slaves to the ponzi. We juris debtors have felt the ravages of the ponzi up close and personal. With congress approval rating at 9% historic low, its only a matter of time.


  1. I like your perspective, and that you don't focus solely on the microcosm of law school or higher education.

    Yes, we are so financially screwed. In reality, we are nowhere near being economically viable - as a nation or individuals. ("Yes, go ahead and buy your spoiled kid another pair of Nikes. He needs them to match his green ones with the yellow laces. Oh, you only make $50K with you and your wife combined and you live in a $300K McMansion? No biggie. Just slap down the plastic. Don't worry about the 26.99% interest rate. Surely, you will be able to pay off the balance every month, you big money maker you. Go ahead, High Roller. You got this. Plus, Jimmy can show off his latest toy to his 10 year old friends at school. The fact that he got tired and bored with his 37 Christmas presents is an anomoly - he will love these $160 shoes for many years.")

    I apologize for the long rant, but conspicuous consumption is one of the VERY worst things that ever happened to us. Easy credit, a bulky military and a central banking system have propped up our "economic health" for several decades.

    When you do not produce actual products, you can not have real wealth. Thank you for highlighting this scheme.

  2. Yes nando conpicious consumption has led to and will continue to lead to the downfall of the US.

    However, I would like to bring to your attention something that the corporate media attempts to distort about indebted Americans. The reality is that while some americans splurged, most of them borrowed for important reasons, such as education for themselves or children, costly medical bills, and important items. I have posted charts showing how gas prices, school tuition, rents, and medical care have skyrocketed while wages have actually fallen on a real basis. Many families are one medical operation away from bankruptcy. People borrowed for the purpose of obtaining startup captial for their small businesses as well.

    The media likes to paint a portrait of the "deadbeat" borrower. However, this is not the case. Many others got caught up in the mortgage frenzy due to fraud (short term teaser rates were believed to be the total rate) and others were worried that they would be forever priced out of the market. As hard as it is toi believe it was actually cheaper to buy a house with a ARM as opposed to renting! Its very similar to the law school scam. Many people levered up for the purpose of obtaining a reasonable middle class standard of living.

    Bottom line: some splurged, many were forced to borrow to compensate for stagnant real wages.


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