Possible False Start to Systematic Failure in the Economy

As my readers know, the Pimpernel tries to keep up with things in the economy. Last week there were some odd things in the markets, Japan's stocks losing 10% being a big one. All weekend I have been reading stories on what is going on and the trend seems to be that even the mainstream media is reporting that this week may be important and that markets may see major corrections (losses). Here is the thing, if the stock market dropped 10%, it is still only the beginning of the real corrections. When banks fail, people should put their money in non-bank stocks. Let me repeat something I have said before, stock market volatility is to get the average person out of the market and it is a time when the average person should do the opposite and get into the market. We should be long term investors and not day traders.

Here are just a couple of warnings from over the weekend.

NBC News - Week ahead: Watching for signs of a too-strong economy

The Motley Fool - Is the Stock Market Overdue for a Big Plunge?

There have been plenty of articles warning that this week could be very volatile; but, it has also been stated that this is the week when the big players take their vacations. Whatever happens this week, if anything happens, is just the beginning of what is coming. The financial system needs to be restructured and the plan that is in congress will not do it properly. The "Derivatives" market cannot be allowed to operate without controls and the people that run the market are the same ones that just wrote the new regulations that are being voted on and they exempted themselves from regulation.

I shall tell a true story, something I actually experienced. When the housing bubble was in full swing, I was asked to meet with some mortgage brokers. I told them that the housing market was going to crash. I told them all of the indicators that are traditionally watched in the real estate market, I told them how we were going to see a severe recession. This meeting happened about a year and a half or so before the housing bubble crashed. They looked me dead in the eye, said my analysis was well thought out and then they told me that I had to be wrong because things were going so well in the economy and this was how they made all their money.

Money is a drug and those who have the most are the least likely to believe the gravy train will ever end. Our markets are run by money junkies and they will do anything to get their next fix; but, it always ends badly. Quite awhile ago I wrote about how the movie "The Hangover" was the perfect analogy for our over-indulgence since 2002. Did you really need televisions in the backseat, did you really need spinner wheels or that Lincoln Navigator? People went crazy spending money that they had not earned and that went away as fast as it came. Now is the time to check out of the room, leave the maid a nice tip and start over.

The current economic system has been unwinding for a bit, no one event does it all. The Bank of England and FDIC said they are looking at "systematic" failures. This not about a bank failing, no matter how big. It is not about stock markets crashing. It is about all of the system failing because it is all rigged.

Lets say that this week is really bad on Wall Street, it doesn't matter. The purpose of all the turmoil is to bring in a new economic and financial control system that is international in nature. That is the end game.