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What if we had a party and neither bulls nor bears showed up?

That is, I think perhaps a third direction is in order. One that will indeed produce winners and losers, but at the same time. For every Bear Stearns, a JPM.

Call it a “restructuring”. What it amounts to is both a commercial and government return to a more orderly credit market. The basic idea is the old one: Only give credit to those who DO NOT need it.

Credit only given to those with 100% collateral, and non-speculative collateral at that. And if you can’t afford it without credit, you can’t afford it.

At the government level, this means no other choice but a real constitutional balanced budget amendment. No more deficit spending *at all*. Any excess goes to reducing the debt, not a last minute splurge at the candy store. It is not unlikely that the size of the federal government will have to be reduced by a third to a half.

Any bonds or treasuries issued will have to be backed with something tangible. Probably not gold or silver, as there is not enough of it to go around. But something that is not speculative.

For corporations or “the man on the street”, the days of easy credit will be over for a long time. For most people, this means the end of the credit card, and that they only have a debit card. You don’t get a new car until you can pay for it in cash. No money? No problem! No sale!

Home mortgages will be reality based, and uncreative. Home prices will drop until they are reality based as well. This is the way it used to be.

Few today remember that the Dow Jones average used to vacillate between 800-1000, for YEARS. It didn’t leave this range because it wasn’t permitted to leave this range. And during this time, much pressure and potential for growth built up.

Well that pressure and potential for growth have been pretty well used up. So now the market restructures to find its center of stability. But this is not the same thing as a recession. It is a solidification. No more bubbles or boom times for a while. And growth industries will have to be fully funded from the onset, until they can pay for themselves. And their first task will be to pay back their backers.

Yes, it is a very different economy indeed. One not really seen in some ways, since President Nixon.

“Inflation is not a reduction in real wealth for a nation - but a redistribution of the rights to that wealth among its citizens. Those who lose wealth often pay taxes for the privilege, while the wealth gains can be tax-free.”

The Great Retirement Experiment
http://the-great-retirement-experiment.com/index.htm
What happens when 50 million boomers try to cash out $44 trillion in PAPER wealth?

Deflation Meets Inflation
http://www.financialsense.com/fsu/editorials/amerman/2008/0306.html

Get ready for the redistribution.