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Never forget we are in completely uncharted waters. “Travis McGee” will say no, as this is the typical end to the typical credit bubble, and of course I agree in principle. But in detail, we are in completely uncharted waters. 60 trillion dollars in credit derivatives. Nobody really knows where this will end. Nobody.

So what you are in effect saying is we are up chit's creek without a paddle?

I’m saying the future is completely unknown. Does this end in deflation and depression? Hyperinflation? Collapse of the dollar? A deep recession, then back to normal? 70s style stagflation?

I don’t know. There is no consensus. The way the markets are acting is different than at any time since 1929. This is not quite like 1987 or 1998 or 2000-2002. This is unique.

I can’t conceive of a depression. The scale of this problem seems to be much smaller than the Great Depression. We don’t see people with money leveraged in the stock market at 9:1 ratios. As bad as the housing bubble was, we don’t see every other person flipping investment property. Too many, but nothing like the roaring twenties.

This should be nothing more than a really deep recession that lasts 18 months or so.

Then you have the $62 TRILLION in credit derivatives that Warren Buffett called “financial weapons of mass destruction.” Sorry, you just don’t fade buffett. If he thinks derivatives can vaporize your FIRE economy, that is not something you want to take lightly.

Then there is the sudden, massive printing presses that Chopper Ben is loading into his whirlybird fleet. If all this works out to be just a long, painful recession, then that has to cause some really painful 70’s style inflation on the other side. If deflation in housing and other assets is not done, then we get the full-boat stagflation.

Then we have this massive welfare state that was not this bad back in the roaring twenties or in 70s.

Then you have a war that is being charged on a Fed credit card off the books followed by, oh, $50 Trillions or so of unfunded liabilities from Medicrap and Social Disease Security.

I’m telling you, we’ve been living on a floor of funny money for so long, that when they pull the floor out from under us, we’re going to fall pretty hard. I just don’t know how far down it is under the phoney floor. It’s beautifully tiled with hand-crafted marble and polished to a brilliant shine and inlaid with rare gems, but it’s just an illusion and right now it is crumbling under our feet. It was always an illusion. We were walking in the clouds. Now we get to try our hand at flying.

I’m just hoping and praying the fall isn’t too far and we can get by with a spraigned ankle or a simple fracture, get into physical therapy for a few months, and be on our way. I praying we don’t end up in a body cast.

I can’t find a single credible soul who seems to know how this all ends. The interconnections are so complicated here, probably chaos theory or something, and there is just no knowing how the billions of people on this planet will react to it all.

That’s my point. I have no clue how this ends. I can’t find any credible economist to offer how this probably ends. I can’t position myself or protect myself as a result of that uncertainty, and this is terrifying the markets and causing bank runs and cash to be stuffed in mattresses.

This is real. Illusion over. Reality is here. How does it all end? Nobody knows.

So what you are in effect saying is we are up chit’s creek without a paddle?
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It’s even worse, we are DOWN that famous creek without a paddle. The current is against us.