What would bring reality back into focus? How? When would it happen?
I had a theory. My theory was that the minute Baby Boomers began to retire they would withdraw their 401(k) from the stock market en masse. When they all sold regardless of the underlying asset’s value it would irrationally distort prices too low. Just as when everyone buying (in the guise of a 401(k)) regardless of the underlying asset’s value had cranked the DOW out of whack. Meanwhile, the government would be forced to irrationally devalue the dollar to paper over their Ponzi nature of Social Security. Both would certainly be stampedes to avoid. But when? Baby Boomers are a herd, not a single person. Some would retire first with others to follow. When would demographics finally pull the trigger?
Even if they didn’t light the fuse, Bush and Obama put the spark in the vicinity. When the economy lurched (as all economies do) I breathed a sigh of relief. Maybe a “correction” would bring us closer to the realm of realistic values? How naïve I was! Rather than man up and ride out the storm, two presidents collectively shoved 1.8 trillion in euphemistically named bullshit up our asses. Destroying old Volvos in efforts inexplicably related to bad mortgages is a bad idea. In fact, destroying anything to get nothing is a bad decision.
Furthermore, money is just little slips of green paper. You can use them to buy Hondas and heroin only because people have trust in an underlying system. After flushing 1.8 trillion bucks debts reached levels never before seen in the course of humanity. There’s no way to sugar coat the truth; 1.8 trillion is a big enough number to destroy a currency. (I’m not saying we’re irretrievably doomed, only that the Government foolishly assembled the elements of a weapon they should have left alone. Dinking around with interest rates it’s playing with fire but they’ve been playing with the gateway to hell.)
Aside from the scale, this could have been just another in a long line of unwise but otherwise mundane bad decisions. After all, fiscally stupid moves permeate our world. But, and this surprises me as much as anyone, the veil was lifted. Reality didn’t come as Baby Boomers retired. It came just a little bit earlier.
For no good reason, people had come to believe that houses, unlike any other asset on planet earth, were magic. Assets that could gain but never lose value. All at once, people realized that it was untrue. Of course it was untrue. I have no idea how people could have conceived otherwise. But once everyone simultaneously got a whiff of their own shit; the jig was up.
From that moment until now, America (and indeed the world) has lurched from one economic crisis to the next. I no longer ask when everyone will simultaneously realize that bullshit is not truth. I no longer ponder “when will the shit hit the fan”. Shockingly, the answer is…now!