Sunday, August 8, 2010

Our Economic Shell Game

We are a nation of speculators that are being hoodwinked again and again in a confidence game run by our government subsidized financial sector.

We lost our savings in the Tech Bubble. Then we borrowed trillions of dollars to play in the biggest real estate bubble of our nation’s history. It was a highly leveraged bet that real estate prices would never come back down to historical average value again. This "fair value" is the average of the historical trend line so it the most likely outcome in the long run.

Of course this was an impossible bet. A shell game is driven by the profiteering of the operator and not the profits of the speculator.

Remember, this is not gambling. This is a shell game. There is no chance of winning.

The government and the financial sector sold our citizens on this impossible bet. Our job producing manufacturing sector that was the envy of the world has been dismantled as our nation’s resources are directed to the huge government run financial confidence game. Instead of growing our economy with increases in savings and productivity we live within the boom and bust caused by each new round of speculation.

The past two bubbles have taken our savings so now we are playing with borrowed money. We must go begging to China for the ten trillion dollars that will fund our next round of bets.

We have just begun the next game as our politicians have supposedly put the pea under the shell. The con is no different than before. We are betting that asset prices will continue to remain above historical fair value forever.

So far the game is exciting. Through massive unsustainable market manipulation by the government, high end real estate is being pushed back into a bubble as the cost to buy in many major metro areas is double the price of rent. Most commodities and many of the more speculative stocks are solidly in a bubble. Long term bonds are in a super bubble.

If the action slows then taxpayers fund bailouts to government shills to keep money in the game. The nimble fingers of the Federal Reserve pickpocket interest from savers to help foot the bill.

At some point in the future the shell will be lifted showing asset prices have come back down to historical fair value. As they absolutely always do, 100% of the time.

The suckers will be rolled yet again. Wall Street economists will call this inevitable loss a "black swan", or a "fat tail" or maybe a once in a 100 year event.

The outside observer must laugh at the fact that the most likely outcome is percieved as impossible by the speculators. This is all part of the "sleight of hand" in performing the con.

After the bust it will be time to go home and explain to our children that we have spent the last 15 years gambling at shell games instead of working and saving. Our money has left the job creating private sector to be wasted in this huge government subsidized financial con game.

I am sure our children won’t understand. But really what rational person can understand someone trying to win money in a shell game!

Our children will go back to just working and saving…

“Oh kids I almost forgot, China will probably be giving you a call soon about some money that you owe them ... "

“Double or Nothing?”


  1. Very well put. Bravo for your logical and correct assertions and conclusions.

  2. Sleight of hand, not Slight

  3. Excellent essay.

    A question:

    Why, Why, WHY can't more people see what's going on - especially the ones in pain, who should be most curious of its cause - or do we as a nation, as a society, as a culture, simply not care?

    I've worn a groove scratching my head about this.