RED ALERT: Next Debt Crisis Near!

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Pattern #1
The stampede to risk is a herd phenomenon.

When the Fed pushes interest rates down to practically zero and when Uncle Sam virtually guarantees a failure-free environment, the Garden-of-Eden illusion captures nearly everyone; nearly all players are enticed by the forbidden fruits of risk.

This is why every major equity mutual fund, commercial bank, brokerage firm, and U.S. household got scorched in the Tech Wreck of 2000-2002 … and were burned even more severely in the Housing Bust of 2006-2009.

This is why state retirement funds like CALPERS, supposedly conservative banks like the Union Bank of Switzerland, and even government-sponsored agencies like Fannie Mae alsogot killed.

Pattern #2
Greed breeds corruption. To keep the party 
going, companies and governments dress up
the numbers, hide the facts, or simply lie 
through their teeth.

In the years leading up to the Tech Boom, dot-bomb companies padded sales reports, created phantom capital, disguised costs, and then, to add insult to injury, convinced the world that profits were a non-issue to begin with. An estimated 31 percent of companies listed on the NYSE were suspected of manipulating their earnings reports. Nearly all “buy” recommendations by Wall Street research analysts were bought and paid for by the companies being recommended.

In the Housing Boom-Bust, the lying was even more widespread. All major Wall Street firms conspired to create fictional market prices for “structured securities” based on shaky mortgages. And all three established Wall Street ratings agencies joined the conspiracy by assigning triple-A ratings to the grossly overvalued, high-risk securities.

Meanwhile, chief executives of Fannie Mae and Freddie Mac, financiers for much of the mortgage industry, repeatedly swore before Congress on a stack of Bibles that their books were both clean and strong. They were neither.

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