Debt Bubble Burst - It has begun.

The fall yesterday is reminiscent of what I experienced in 1987 when the market dropped 23%. I was fully invested, including on margin. The difference now is that it bounced back 2/3s the same day. What was missing yesterday was the market being put on hold, for a breather. This mechanism was set up as a result of what happened in 1987. Look at yesterday as a big earthquake and now there will be unpredictable tremors.

The stock market is so complex now with computers controlling 70% of the trades. There is no one behind the wheel. It's a collective setup that once in motion seems unable to be contained. For those of us individual investors, we must discipline ourselves to act opposite of the crowd. To do this, we must know our emotional selves well, so we do not blindly join the wave of self-destruction. I believe that we should be knowledgeable of what we are investing in even if we are paying an 'expert' to do it for us.

Europe is dancing on a financial tightrope as evidenced by the plunge of the euro, the equivalent of our dollar. What concerns me is the citizens of Greece are willing to force their country into bankruptcy rather than sacrifice anything for the benefit of the whole. I wonder if the government has the strength and determination to enforce the austerity programs that will be required to stem its debt burden.

Step back and look at the world. Notice all the uncertainty created by sudden changes, including those from Mother Nature; the latest being the worst flooding on record in Tennessee. We are in an energy of flux because we have reached critical mass and change will be the result of that. This is how the Universe works. We can act in fear or use this time to clean ourselves within so we can see the benefit of why it is necessary. It is heartening to see the grass roots efforts becoming more influential in directing our government; the latest being the reverberation from passing the Arizona illegal immigrant law. Change is all around us and we do have power in directing this energy as can be seen. We can change the federal government's priorities through our expression. As for Mother Nature, we can accept that she is a great teacher and does not discriminate against anyone. From her, we have the opportunity to learn what really is important. And it is not money and things.

Inflation

GDP contracted, a given.  The Feds loaning and giving billions to the top banks, backing commercial paper and money market funds.  Banks holding the money, doing the opposite of the intention of $700B bailout.  How long has it been since it was shoved through congress with the warning that there would be a financial meltdown without it?  There's a credibility gap with the Treasury with them using the 'cry wolf' approach.

Everyone is focused on the trees as inflation moves silently through the forest.   I can see a headline on the near horizon:  The world struggles to contain inflation that has jumped into the double digits.  People would argue that commodity prices are falling.  I am looking at the massive printing of money to meet the trillions of spending set in motion by Congress and the Treasury Department.  And if we end up with a Democratic controlled House of Representatives, Senate, and Presidency, then the momentum will continue with deficit spending to rescue the 'American people.'  

The good news is the stock markets don't mind inflation because prices can be raised to offset it.  The bad news is the consumer's money is worth less unless they are receiving raises or creating money to meet or exceed the inflation percentage increase.

What I find unfortunate is that we have had a check and balance for the last 8 years with a Democratic controlled Congress and a Republican presidency, and still we increased our debt by the trillions.  It appears that regardless of who is in control, the same path is continued.  I know that, at the world level, we will reach a peak regarding the debt level because there will no longer be willing and eager buyers without huge interest returns.  There will be a point where the answer is 'no.'  That will be a good turning point and also a painful one for those of us who participate in the financial system; virtually all of us.