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subprime is just a small part of what's going on, in fact a very small part
financial deregulation is a bigger part and one of the root causes, Glass-Steagall being being repealed for example opened the door to rampant over leveraging and fraudulent financial practices
the other issue in play right now is the accounting laws got changed a few years ago with most firms now forced to use the "mark to market model" which works great when things are growing, it fails miserably if things contract and your over leveraged
hedge funds, banks, retirement funds, etc etc are ALL way way over leveraged and placed all their hopes on never ending growth which is not only unrealistic but plain stupid, in the process they let themselves get to the point where when the margin calls come they can't pay up...........
add to this the fact that the US model of finance right now is unstable, untenable, and just does not work long term, it can't......our fundamentals stink, and we're talking world record size stink, the US is the world's biggest DEBTOR nation, we produce little and most of that is feed stock and materials which are turned into goods by other countries then shipped back to us
add to that our fiat currency which in the history of the world has never ever turned out well, every single time a country has used a fiat currency and abused it, it has failed spectacularly
in the news we keep seeing its a "liquidity" problem, no the reality of it is its a insolvency problem, we used to have stringent checks and balances in place to curb excessive leverage and risk taking, they no longer exist, and we have a govt that looks the other way and even helps monopolies take advantage of the situation........this is like hiring the proverbial fox to guard the hen house, duh, what do we expect?
all the classic signs and events are right in front of our faces:
debt climbing out of control
precious metals climbing in price while currency plummets
unemployment rising
bankruptcies climbing
financial institutions that should have solid balance sheets don't
the govt stepping in and promoting MORE BS financial tricks instead of fixing things(big clue right there)
recovery? doubt it, not until about 20-30% of current housing value goes bye bye, and about 60-70% of the hallucinated wealth held by wall street gets marked to market at fire sale prices bringing us back to late 90's to year 2000 levels, and maybe more and all that still doesn't even put a dent in the over valued economy of ours, there will be more unwinding after that.......you don't get away with dropping the prime rate below the real inflation rate for years on end and not pay the price for that at some point
and while all this goes on, the life blood of our way of life will continue to get more expensive, oil will not be getting appreciably cheaper ever again, the supply side can't pull it off
simple solutions to all this, I don't expect to see it happen though, the powers that be can get away easier by continuing the pump and dump they've been doing then just leave and take their game elsewhere when the US is finally toast, the sign to look for is when other countries abandon the dollar en masse and another reserve currency comes into play, once the US loses that its game over
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