You Gotta Know When to Hold 'Em and Know When to Fold 'Em

We are now solidly into our third and final economic bubble. I call it The Government Bubble. It will be the last bubble because of its nature. Our previous bubbles were created by greed and fear. This current bubble is different. It is the culmination of a chain of events that is leading our country into a period of disillusioned apathy. This is the point when a gambler realizes that realistically the game is over. The last step is just to hurry up and lose the rest of his money.

I would like to compare this point in history to that of a compulsive gambler on a bender in Las Vegas.

There is a family man that comes to Las Vegas with his $10,000 nest egg and high hopes. With help from the casino there is a chain of events that will occur to eventually appropriate the gambler from his money.

The first $5,000 would be lost because of greed at the crap table. This first loss isn't earth shaking and it could be fun. There is still hope for a comeback.

Compare the family man at the crap table to the Tech Bubble.

The Housing Bubble could be compared to the loss of the next $5,000 at the roulette wheel. This is where fear comes into play. The family man starts to worry about the long term consequences of his actions.

The final sequence in this chain of events is debt, then disillusionment and finally apathy.

Our current Government Bubble could be compared to the $10,000 marker that this family man signs in exhaustion at 3am to keep gambling at the high stakes poker table. This is a marker to the casino that is backed by his kid’s college account.

Later as the sun comes up, the gambler has $5,000 left to lose before he gets to go home and tell his wife the news. That he has gambled away his son’s college savings.

At this point the irony is that even though physically the gambler has only lost 75% of his total bankroll, mentally the money is already gone. The bets will get bigger and involve more risk. The compulsive gambler will play till his money is gone and his credit is cancelled.

Now compare this family man gone wild to our country's current predicament. Our homeowners are insolvent. Our banks are insolvent. Our taxpayers are insolvent. Our state and local governments are insolvent.

Our nation has spent the last 15 years spending our nest egg. Half the money has been wasted by our government and half has been gambled away by our citizens. But how the money disappeared doesn't matter. The tipping point comes when the gambler loses his fear. Fear is the emotion that will force a gambler away from table. It will snap him back to the reality of his obligation to his wife and his children.

There is no longer any fear in our economy. Only disillusionment and apathy. We are impoverishing our children to play another hand. There is no future, there is no past. Only living in the moment with borrowed money. Geithner flying to China, hat in hand, head bowed, begging for yet another stake to be gambled away in the markets.

A once proud nation of savers, now on it's knees groveling for loose change from strangers. Our forefathers that fought and died for our freedom would be horrified by the sight.

But we don't see it. We just sign the next marker so we are allowed to play the next hand.

It is 5am at the casino and the sun is coming up. We don't want to leave and face the realization that our nest egg is gone.

We will mechanically spend the last $10 trillion in credit that any hostile foreign nation will loan to us. It is all a part of the process. In the end we won't even save 5 bucks for a $3.99 steak and egg breakfast that the casino uses to lure unsuspecting patrons.

We will only stop borrowing and betting and spending when our last source of credit runs dry.