Guest Post: Illusions Versus Reality

Tyler Durden's picture

Submitted by Tony Palotta of Macro Story

Illusions Versus Reality

"Illusions commend themselves to us because they save us pain and allow us to enjoy pleasure instead.  We must therefore accept it without complaint when they sometimes collide with a bit of reality against which they are dashed to pieces."

- Sigmund Freud

Our global society needs a reset.  The insolvency of Greece or the growing US fiscal imbalance are only symptoms of a much deeper problem. It is easy for market participants to sit behind their red and green charts and point blame at "the Bernank." It is easy for homeowners to forego their mortgage payment to fund the expenses they are "entitled" to.  It is easy for the Mortgage Bankers Association to "strategically default," after all it's a "business decision."

I'm sorry but "the Bernank" is not the problem. People are "entitled" to nothing and "business decisions" have moral implications.
If you witness a crime but fail to act can you simply wash your hands? If someone emotionally or physically attacks you and you fail to defend yourself are you an innocent victim? If you spill a cup of hot coffee why does McDonalds have to pay you one million dollars and write the words "hot" on every subsequent cup sold thereafter?

If the world resets its debt yet society fails to reset its moral compass then we will have done nothing more than "kick the can" down the road. We will have squandered an amazing opportunity for true "change we can believe in." We will have solved the symptom but not the problem.

The only way people truly solve problems is when they are confronted with a tragedy, whether personal or financial. When left with nothing people truly find what they are missing.  Those who grew up in the Great Depression talk about what they have while those after that life changing event talk about what they want. The different views on life are small yet the implications are massive.

The solution to the world's problems is simple. People know the answer.  The convict who lives on the lam for twenty years is relieved at their capture for they are tired of the hunt. People have debt they know they are slaves to.  People have jobs they know brings them misery. People are in relationships they know brings them unhappiness. Yet they do nothing until they are forced to act.  Until they are confronted they will continue to run waiting for the day of capture when they must face reality and begin the process of healing.

As a trader it's your fault you are losing money, not "the Bernank." If your spouse is spending beyond the family budget you have a responsibility to stop reinforcing the bad behavior. A strategic default may be a way at getting back at the bank but what about the financial damage to your neighbor.

The world is entering a very scary and dark period. We hear of hyperinflation. We hear of the end of the fiat currency system. We hear of a period of grave economic depression before us. Our illusions and our reality are truly on a collision course. The road ahead may very well be difficult but it is also an amazing opportunity to truly solve the world and society's problems. Failure to act is all of our fault and we will be forced to live with the consequences.

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Thomas's picture

Sorry. Doesn't work for me. I am debt free, have averaged 13% annualized return since 01/01/00, and am still royally pissed off at the Fed and Wall Street. Most of us wish to see some convictions of the mobsters. You may be posting on the wrong site; this is Zero Hedge, home of some very angry people.

lynnybee's picture

Yes !  doesn't work for me, either !   ....... good citizen, good worker, good person !  for what !  to get scammed, defrauded & lied to !  .......... you bet your butt there are a lot of damn angry people on this site (but, not mad at the wonderful people who created this website & the wonderful commentors! ) .    Just a few short years ago I thought I was going to retire in my little paid off house, debt-free !    Now, I find I am in an epic battle with a criminal gang of off-shore bankers who want to steal from me & my kids !    criminal bankers, corrupt government, impoverishment due to hyperinflation, joblessness, it's all outrageous. 


topcallingtroll's picture

Did you refinance and take equity out of your house?

If so, then you can't blame criminal bankers.  You were to blame.

Derpin USA's picture

He wasn't singling out any individual. He was pointing out the overall attitude and belief system. He's pointing the finger back at those people, and he's correct. You are the exception, not the rule.

All the stuff you're mad at is made possible by the people he points to, so consumed with the amassment of material wealth and shiny distractions that they can't be bothered to pay attention to what's going on around them. Instead, they only care about what they feel they deserve. They are the problem.

This whole fiasco has only been made possible by a populace too consumed with greed to realize they were being led down a terrible path. Regardless, they still did it. Ignorance, as they say, is not an excuse.

Ahmeexnal's picture


"This is a country of fiefdoms, like the Middle Ages, you know 'I want my airport ... my convention center and my high-speed train,'" said Stephen Matlin, managing director of the Matlin Associates investment banking firm in Madrid.


"What we're doing is maintaining the old economic structure of the country," said Fernandez. "Instead of investing in new skills for people ... we spend money on keeping them busy to give the appearance of bring the unemployment figures down."




oldmanagain's picture

Being against "airports" is a new one on me.  Why not hospitals, those really hurt the pocket book. Anal retentive Fox support of corporate greed may lose the transportation sector vote.

Thomas's picture

"I'm sorry but 'The Bernank' is not the problem."

He could have blamed us and gotten away with it if not for statements like that.

Derpin USA's picture

The Bernank is a symptom of the larger problem. His evil is only made possible by a people too consumed with their own greed.

nuinut's picture

Here's a simple diagram of the problem:

There are no other problems that are not in fact symptoms of this, including problems same may have with their "moral compass", as Palotta puts it.

Illusions = Claims

Reality = Assets

Problems stem from our valuing them at par, which enables the creation of debt.

Diagram from

Derpin USA's picture

I agree, but what came first? The illusion or the greed?

RockyRacoon's picture

Water, food, clothing, shelter....  in that order.   All the rest is just trappings leading to trade and improved life.   Gold, at the top of the tangibles, just facilitates the process.   All above that level is ephemeral in the long run.  Quality of life is absolutely subjective.   The article points out that debt and credit are unnecessary if assets are properly handled and the processes kept honest.

nuinut's picture


Credit and debt can be replaced by equity, resulting in an equitable system.

The bulk of our problems would dry up and blow away. This ain't utopia, to be sure, but it does make today the "Dark Age" by comparison. And we are already aware of that, intuitively, that this is currently no golden age by any stretch of the imagination, aren't we?


More and more people are waking up. Many more will be rudely awoken before this year is done.

Buy physical gold to both store value and to kill the beast. The entire system is reliant on the liquidity supplied by fractionally reserved gold. Gold in your possession is not available for this process, and neither is it subject to any counter-party.

oogs66's picture

yes, but the regulators don't even have the balls to make TBTF banks put up an extra 2-3% of equity NOW!  Why wait til 2015?  There are potential problems not fixed - PIIGS, CMBS, Resi, etc, and yet we want to wait til 2015 to make banks raise some extra equity?  And even then the regulators already seem to be backtracking on if its necessary.  We do not have the courage to forego any form of comfort today to ensure a safer future.

malikai's picture

What you speak of simply hastens the process described in this article.

j0nx's picture

SOME convictions? There needs to be THOUSANDS of convictions. After that then we can talk about changing society's moral compass. The simple fact is that people are tired of taking it in the ass from NY and DC and they are starting to do the same things as the sociopaths in charge have been doing. Moral hazard, 'aint it a bitch?

DrLamer's picture

From the lack of responses here:

I have made a conclusion that moderm so-called americans prefer 30+ years of Sluggishly progressing schizophrenia.

No crashes, no revolutions, only socialism.

JW n FL's picture



The Majority of "We the Sheepeople" do prefer to ignore and sleep thru the hard work portion of all this, yes.


no need to junk him for being truthful..

agrotera's picture

looks that way, with humans' innate cognitive dissonance and comfortable numbness , and for so many reasons, we sit back and allow our elected officials to sacrifice their to minds and our wellbeing to "experts" that write laws that sanction criminality...BUT  we still have a vote, and maybe just maybe, that vote might bring forth some honest public servants.

DrLamer's picture

BUT  we still have a vote, and maybe just maybe, that vote might bring forth some honest public servants.

Your public servants is a mirror of yourselves. While you will remain idolatric pagans you will get from GWBush to naive  Obama, both surrounded by (not only jewesh) financial mafia.

agrotera's picture

Financial  mafia, for sure...I know it is hard to believe any honest person could survive running for office of any kind knowing how most elected officials are purchased.

I guess it is highly unlikely for anything to shake the scum out of control, but the discussion to get rid of the privately owned federal reserve is happening...although far fetched, anything can happen.  I do hope for peaceful resolution and that doesn't mean that people are idolatric pagans to want to use peaceful means to get political change.

James's picture

Why would one think that peacful means would be effective against a violent opponent?

Cleve Meater's picture

Because it's the only thing that works... Turn your back on them... Completely.  Ignore them.  Don't vote... Cut up your credit cards...Don't bank (or if you do withdraw your monthly salary in cash as soon as the check clears the bank) Pay for as much as possible in cash... Fuck up their accounting by paying a few cents more each month... Move offshore... Buy a few acres or hectares of land and grow your own damn food -- using real seeds.

Stop shopping at grocery stores... Go to farmer's markets.  Stop shopping at Wal Mart... Go to second hand, Goodwill, or local merchants.

If you have a retirement account, 401K, IRA, SEP IRA or Simple IRA convert it to a self-directed IRA which you, not Wall Street, control and move the entire thing offshore.  Invest in whatever you want to invest in - land, farmland, real estate, foreign stocks, foreign equities, even other businesses.

If you have to fly for business or pleasure, refuse the backscatter. Force the TSA motherfuckers to pat you down each and every time. Did you know that if you "opt-out" of the backscatter, you can't touch any of your bins once they come through the x-ray?  That's right, a TSA drone has to carry them to the area where you get the pat down.  So, load up 5 or 6 or 7 bins with your junk. Wait until the last possible moment to declare you're opting out, and then say "opt out." Make them find one of their flunkies to give you a pat down.  Wait patiently. Then make them carry every one of your bins to the pat down area.

When they pat you down, moan, gyrate your hips, groan with pleasure. Fake orgasm. Fart if you can.  Where your stinkiest pair of socks. Violate their dignity as human beings, just like they are violating yours. Make their day just that much shittier.

TSA orcs may be complete asshats and morons, but I assure you they hate patting us down just as much as we hate it. They'd prefer we give up our rights without a fight.

Most of all, stop with the bitching and whining. Stop thinking you can fight the system head on. If you think you can, you're smokin' dope.  You can't compete with a military industrial complex that will most assuredly be unleashing drones on our own citizens at some point.

Every society since the beginning of time has had its guerillas. They have all eventually brought down corrupt systems. Harass your opponents gently, most effectively by ignoring them.  Follow the letter of the law, but progressively grind them down. There's not a decisive battle, this is classic assymetric warfare. 

When enough people get wise to that, the system crashes.

MountainLotus's picture

Great article! However, it will be easy only for some group of people like Zerohedge members to recognize reality. But, for the entire society to spending responsibly, watching carefully for the collapse of fiat currency is truly difficult. For example, like I said before, my country is going to have an election in the coming weeks, but all of us voters still cheer for most crazy deficit spending policies, for most easy money hand out spree. They won't look ahead and face reality until we like Greece.

Misean's picture

You go out there and solve the world's problems Sancho...erm...except that it's people wanting to solve the world's problems that got us in this mess in the first place.

Here's a thought. You solve your problems, and I'll solve mine.

cynicalskeptic's picture

The problem is that in the current rigged game, those with the means to do something use those means ONLY to further their own personal agendas - those WITH resources use those resources to gain even MORE resources.  E.G. the rich get richer and the poor get poorer  - NOT because the rich work harder or smarter - in fact many of those who are 'poor' work far harder than the 'rich.   Those lacking resources - the 'have-nots' find it almost impossible to advance in a system that is controlled by the 'haves'.  Few of the wealthy I know have EVER worked as hard as the working poor I know.  And the few that HAVE managed to advance their status usually did so because of lucky or hard won 'connections' - far more important than sheer effort.


The top 1/10 of 1% who control an ever growing percentage of the world's wealth - far more than the bottom 50% (or is it 75%)control - use that wealth NOT to 'solve the world's problems' but only to gain control of even MORE of the world's wealth.......


The world may not be fair but you should endeavor to leave it a bit more 'fair' than you found it...... 'Trickle down' economics are the rich pissing on the rest of us.. 'Compassionate conservatives' care only about themselves - they are not the slightest bit 'compassionate' about those born with less than they have and are more than pleased to work those people to death while profitting as much as possible from the labor of their 'lessers'.

Founders Keeper's picture

[...'Compassionate conservatives' care only about themselves - they are not the slightest bit 'compassionate' about those born with less than they have...]---cynicalskeptic

Phew! I can smell the stink of social justice a mile away.

(Painting with a broad brush there aren't we, cynical?)

I'm not in the 1/10th of 1% of the worlds wealth. Still, I'm content for the most part. I have countless blessing in my life that money can't buy.

As for "compassion" that's my personal choice. That's between me and God.

I don't like how the gov't distributes my wealth. I like charity. Feels right to me. My wife and I contribute monthly to two local charities and one national charity. On the international stage, we contribute to a particular charity when a major natural disaster strikes. My wife donates professional services to a local charity monthly.

And I'm as "conservative" as they get!

Is the game rigged? Tragically, yes. If you had pursued this topic, it would have been a worthwhile post. Tragically, you didn't.


JW n FL's picture

how about instead of any American being hungry.. we make the top 1% pay what they are supposed to pay?


you know.. what you pay.. what I pay.. what everyone else pays..


like a flat tax or without the loop holes and subsidies.. do you get a subsidy for you land? for NOT farming? No? well you are a sucker.. (me too, dont feel bad I dont think we are alone!)


this NOT about the poor of America, this IS about the TOP 1% who do NOT pay their fair share and thusly are guilty of Treason Against the Populace.. sprinkle on some corruption.. and we have a NICE lil conspiracy.. for the rich to get richer and the hungry to get hungrier!


This is NOT about more from you.. unless it is up to them.. it is about more from them.. if it is up to us. or we can split what they have and hang them all, works for me.

cynicalskeptic's picture

The wealthy and powerful use both to manipulate government to give them additional advantages - 'crony capitalism' instead of real and free competition.  While you might argue that EVERYONE tries to 'rig' the system, truth is that the more money and more power you have, the more successful you are at these efforts.  The person who schemes to get more food stamps than they deserve or some other (relatively) trivial 'edge' even when multiplied by millions does not cost you as much as the no-bid government contract awarded to Halliburton or the corporate welfare going to companie like GE or Pratt and Whitney or Lockheed Martin or Boeing.....the bankers and Wall Street execs bailed out to the tune of billions (trillions) and the hedge fund guys in Greenwich paying 15% 'capital gains' instead of double that in income tax (as they should) cost all of us more than all the criminals locked up for stealing far less.....

I've been in both worlds and am left slack jawed by the sense of entitlement shown by the wealthiest - the real irony is that it is worst in those that have inherited all their wealth - and done nothing of note themselves beyond being born to a family where sometime - often far in the past - someone actually DID do something of value and note (or were very good at scheming and manipulation like buying condemned rifles from the government and selling them right back to the government at a 300% mark-up).  A 90% inheritance tax - over say 5 million (that is more than generous) - would encourage the constructive use of capital, real charity and eliminate the worst excesses of the Walton heir and Koch brother types......

As far as the 'stink' of social justice.....   I prefer that to the stench of unbridled self-centered wealth and power......    Those that REALLY work for a living are far more charitable and generous in their dealings with others than the wealthy I have encountered......  The trust fund kid in college was ALWAYS the one that stiffed te table when chipping in their share at the diner.... the 'charieies' favored by the wealthy are more like little private clubs - excuses for black tie dinners and social netorking - you give to MY cause - the ballet and I'll give to yours - the local art museum... but a food pantry?!?!?  

A few - a VERY few - wealthy may do the 'right thing' but they prefer to let others get dirty and do the heavy lifting - in pretty much all endeavors.......  they are more than willing to fight wars to preserve this or that but never put their own lives - or the lives of THEIR children - in the line of fire......   they pull every string they can to get a NG assignment or draft deferment. 

Urban Redneck's picture

The text of federal laws and regulations is tens of thousand of pages long.

The loopholes that exist to be exploited to further inequality cannot be "fixed" by creating more loopholes in effort at counter balancing and creating equity.  This is simply more of the social engineering, which is what dug the sink hole the US currently finds itself in.  The net effect more pages of laws and regulations, will be more loopholes, and more inequity - a certain quote about insanity and doing the same thing over and over comes to mind.

Short of revolution, the only workable soulution is a MASSIVE REDUCTION of federal laws and regulations.  Eliminate 50%-75% of the pages of laws and regulations, and huge swath of loopholes that further inequality will be removed.    



A 90% inheritance tax will never be paid by the top .01%, there is an army of well paid trust attorneys and lobbyists that have already seen to that.  Taxes, alone, never encourage the constructive use of capital, and often drive misallocation and export of capital.  In order to encourage wise capital allocation - monetary, fiscal, and regulatory policy need to synchronized, which is fundamentally at odds with the current Chinese wall supposedly protecting Federal Reserve independence/control of/by the government.  Internal accounting regulations which promote debt & dividends and regulatory obstacles to business formation, practice, and hiring need to be removed.

15% capital gains is a loophole, it is nothing more than a carve-out for gains on the trading of fiat instruments (as opposed to tangible goods).  Income is income.  Whether it is salary, gain, royalty, rent, dividend or distribution.

Founders Keeper's picture

[The wealthy and powerful use both to manipulate government to give them additional advantages - 'crony capitalism' instead of real and free competition...]---cynicalskeptic

Now that is a worthwhile post. Smart and passionate.

We disagree on the root problems and solutions.

(JW, above, made a good case for the flat tax. I like the flat tax as one of many needed solutions.)

Many people equate "conservative" with greed. I see this all the time. (I think liberals created and exploit this misperception.) Greed is not exclusive to conservatives, the top 1% wealthiest, or Wall St. bankers. Greed is a human condition pervasive across all wealth classes, ideologies, nations, races, religions, across human history.

Conservatism is an ideology. Any person, regardless of ideology, will without a moral compass be tempted by greed, pride, lust, etc.

Don't let the liberal media machine sell you on the idea conservatism is greed. I can see you're smarter than that.


oldman's picture

Thanks cynical,

I haven't heard: 'Trickle down' economics are the rich pissing on the rest of us..' in more than thirty years. It was a greta line then and still has the ring of truth to it.

oldman's picture

Thanks cynical,

I haven't heard: 'Trickle down' economics are the rich pissing on the rest of us..' in more than thirty years. It was a greta line then and still has the ring of truth to it.

max2205's picture

I HAVE a lot of money but I still WANT a time machine and the next days WSJ today..... :)

I lived through the current depression

Westcoastliberal's picture

Yes, angry and getting angrier by the second.  Where the fuck are the indictments?  Are we going to allow war crimes to pass? Torture formally endorsed by our so-called leaders? Election fraud? SCOTUS ethics (and worse) violations? Campaign violations? Lobbyists in control of the government instead of the people? The biggest cash heist in history (Iraq $100 bill pallets $18 Billion), and of course the biggest overall heist, the 2008 meltdown and subsequent payoffs. (And this is just off the top of my head).

We're sure as hell a hypocritical nation if we can't resolve issues like legal alchohol generating untold deaths and misery, and illegal weed with untold health benefits.  Besides it's good for bakery business.

Bottom line, this isn't the people's fault.  They're home watching American idol, drinking a beer and probably smokin' some weed.  Read Joe Bageant sometime and you'll understand what I mean.  The people have been cleverly hoodwinked years back.  It will take a miracle to save this country.

JW n FL's picture

forest fires.. are a good thing.. they kill off the weeds, enrich the soil with the dead nutrients and toughen up the old wood.

Hulk's picture

Except now JW the fuel load on the ground is too high and the burn temp is such that the soil gets sterilized.I seen first hand where, 20 years later, still no trees growing. Only scrub brush..

JW n FL's picture

there is a fire coming.. I am trying to be positive..


the majority will duck and hide.. the stupid will poke their nosey noses out their front door and take two.


this shit must stop, cowards abound with insects feeding on them.. and I am fucking over it. I will talk to everyone I see to educate as many as I can! either they will see it or they will choose to look past it for their own shitty quality of life. but I will fight the ignorance, one numb soul at a time.. &, if I have too.. by myself.

Prometheus418's picture

Not by yourself, friend.

I've got a smallish cabal in WI working towards the same goal- and I am sure there are others.

Prometheus418's picture

Not by yourself, friend.

I've got a smallish cabal in WI working towards the same goal- and I am sure there are others.

JW n FL's picture

until they are unpluged.. they are part of the system.

sellstop's picture

The last thirty years of credit expansion has spoiled most people.Their reality is different than the reality of those who lived through the 30's depression. So, unfortunately, it will take more pain and deprivation to wake them up.

Our leaders talk about how bad the economy is. People repeat how bad the economy is. Yet I see nothing but new cars running down the freeway. I see the parking lot at the casino full. etc...

We all know that debt has to be repaid, one way or another. But I just see more debt. I don't see the return to the basics that is the prerequisite to savings.

I don't think it is over. By a long shot!

Depressingly yours,


malikai's picture

The irony here is that the current retirees who should know better seem to be woefully inable to identify the problems of finance and state today. They too have taken to the lie. How many Staunch republican elders do you know? I know quite a few. How much opposition did they give when Bush "freed Afghanistan and Iraq" at the cost of their own future and that of their children, grandchildren, et all? 

spooz's picture

They can't shake free of a lifetime of partisan politics.  They need to wake up and see that Republicrats are all the same.  We need a third party that leaves wedge issues alone and focuses on the important things we can do to take back our legislature and free ourselves from special interests and their lobbyists.

Cindy_Dies_In_The_End's picture

Nope, wrong, wrong, wrong about most (not all) consumer debt. I have made the argument many times on ZH that "civil disobedience" by lawfully planning and declaring Chapter 7 bankruptcy is a useful expression of displeasure at The System.

People who argue for "paying down debt" before "The End" make little sense. Why not tell a morbidly obese terminally ill person who has a short time left to lose weight? Its illogical.

Assuming inflation carries on to hyperinflation, it makes MUCH more sense to NOT pay down your debt, and then if you decide you must, "THEN" pay it off in hyperinflated currrency. Either that, or discharge it.

While "morality" would be the charge or "irresponsibility", get back to me when the system is cleansed of moral hazzard.



JW n FL's picture

"cleansed of moral hazzard." I am sorry but I just have too borrow this from you, it is beautiful.. sprinkle some doom and gloom with just the right amount of Hell Fire and brim stone and this can be such a wonderful way to bitch slap those not familiar with the rule of thumb.

Things that go bump's picture

The rule of thumb refers to the thickness of the stick a man is permitted to beat his wife with.  It can be no thicker than his thumb.  

JW n FL's picture

I was speaking to lady above me.. Sir.

blindman's picture

@"As a trader it's your fault you are losing money, not "the Bernank." If your spouse is spending beyond the family budget you have a responsibility to stop reinforcing the bad behavior. A strategic default may be a way at getting back at the bank but what about the financial damage to your neighbor?"
hey tony, with all due respect, you may be a fucking shit head? as a
retiree, while ben has made saving for shit, do you thing he gives a
fuck that i eat cat food with my blind and amputee neighbor? no. he
wants to destroy the dollar, have you not heard? then again perhaps you are
correct and the mic does need to be financed with fiat reserve to finance
the systematic desolation we call progress, and on the future taxpayers dime.
enjoy your wet dream.

MacroStory's picture

So I am a $hithead if I lose money trading and blame Bernanke?  That was my point.  If I lose money trading it is my fault, no one elses.  I understand or better learn how the system works regarding capital markets and trading in them. I understand what you are saying about his policy and I am not advocating what he or the Fed or the system does.  I am saying though if I lose money and blame anyone but me then in that case sure, call me a $hithead.