It is now clear to me that, despite temporary rallies in the stock market, we are now facing long-term economic weakness and, with each day that passes, an increasing probability of a depression and wholesale economic collapse. Gold, the ultimate currency and barometer of fear, has risen solidly above $900/oz. overnight (see above chart).I believe that the primary cause for this, among many, is that we have built our entire civilization here in the United States upon a house of cards called debt. The people in government and the media keep referring to "the credit markets", but they are playing a perennial game of semantics. The reality is that we have built our economy upon the sandy foundation of debt.
They're Not Credit Cards. They're Debt Cards! They're Not Freedom! They're Chains!
Excessive cheap "credit" -- debt -- causes bubbles as prices are artificially inflated by easy money without sufficient respect for risk. The more money that the Fed creates and Congress spends, and the lower the Fed artificially forces interest rates, the more it builds the bubble of debt, the more they inflate prices and create bubbles. Easy money and easy credit are inflationary! Why is it that our government and the media always refer to it as "credit"? Why don't they call it what it really represents -- debt? It is no coincidence that we call them "credit" cards. Imagine if we started to call them what they really are -- "debt" cards! That's what they are! Does the easy-money verbiage of "credit" sound better than the less responsible-sounding word of "debt"? Could that be why they avoid the latter word? The word "credit" implies just another entitlement, but the word "debt" implies an obligation. One seems to imply a right and freedom, while the other suggests chains. They are the same thing, but it is time that we begin to look at things the way our grandparents did. Debt represents crippling chains, not financial freedom.
What happened to the time-proven idea of "save for a rainy day"? What happened to saving for something, and then buying it? What happened to "Use it up, wear it out; make do, or do without?" What happened to cash? What happened to paying for something? It is time to save, not time to borrow!
It is now my firm belief that those who survive this financial crisis, and prosper over the coming years of hardship will be those who have "deleveraged", paid off their debts, put away some cash, and saved! That is not only true for individuals. It will also be true for nations!
Despite my opinion here described, I will strive to ignore it when trading. Now that I have acknowledged my bias for the financial markets, I will try to ignore it when taking trades and making a living. I need to leave my emotional biases behind when trading.
