Guest Post: What Have We Learned In the Past 13 Years?

Tyler Durden's picture

Submitted by Charles Hugh Smith from Of Two Minds

What Have We Learned In the Past 13 Years?

We have learned nothing since 1999 except the Central State and Central Bank will intervene in the market to bend price and risk to serve the Status Quo.

If we learn nothing, then we deserve to lose. This is not a popular concept in America at this point in its history, when monumental errors are denied, excused, rationalized or quickly absolved by those who committed them.

As a small-fry investor, when I veer away from my discipline and system, I predictably lose money. As I sift the ashes of the trade, I always remind myself: if I learn nothing from my studies and experience, then I deserve to lose.

What exactly has America learned since January 1, 1999, 13 years that included two stupendous financial/credit bubbles, two hot wars and an explosion in public and private debt? If we examine the policy changes and institutional changes since the 2008 global financial meltdown, then we have to conclude that we've learned a very few things:

1. We've learned that the way to "repair" the catastrophic damage of a financial bubble bursting is to inflate another financial bubble in another asset class.

2. Systemic incentives will be put in place for everyone to speculate in the new bubble, with two important caveats: the Financial and Political Elites will get to play the game with moral hazard, i.e. their gains will be private and their losses socialized, and second, these Elites will not be governed by the rule of law; blatant systemic fraud and embezzlement will be ignored or forgiven.

In other words, some are more equal than others when it comes to the founding precept "everyone is equal before the law."

3. The Central Bank (the private Federal Reserve in the U.S.) will sacrifice purchasing power to lower interest rates and flood the economy with liquidity, i.e. nearly-free money for Power Elite speculation and leverage to inflate the new asset/credit bubble.

4. The Central State will address all post-bubble problems by borrowing and squandering trillions of dollars to prop up the Status Quo and transfer Financial Elite losses to the public/taxpayers.

5. These "solutions" are part of a broader strategy of "problem-solving" that can be summarized as "doing more of the same." If doing more of the same doesn't work, then do even more of the same until you resolve the "problem" by bending the market to your will.

6. To create the perception that the Power Elites have actually solved the structural issues rather than just paper them over, then minor "reforms" will be passed that tweak the parameters of the Status Quo without actually changing the power structure: who owns most of the national wealth and income stream, and who controls the political process that diverts an increasing share of the national income stream to State fiefdoms and corporate cartels.

We can find an analogy to these "lessons learned" in a spoiled teenager who refuses to study and is failing but discovers that cheating can "save the day" with much less effort than actually learning. We as a nation have learned how to cheat, and now we think that learning how to cheat and create the perception that we've actually learned something can be substituted for making the necessary sacrifices to actually learn something.

When the cheating controls the marketplace to prop up asset prices and mask systemic risk, then we are in effect giving ourselves "straight As" even though we have torn up the test, i.e. how our policies work in a transparent, open marketplace.

Thirteen years of cheating have created a dangerous confidence that we can keep cheating by controlling the market forever. The problem for the Central State and Central Bank is that socializing the market via cloaked intervention is qualitatively no different than direct command-economy control as practiced by the former Soviet Union: the real market cannot be destroyed, it can only be pushed underground.

This is why the black market flourishes in command economies.

In the U.S., the market has been manipulated and suppressed but there is no black-market outlet for reality. As a result, the market will reassert itself in the one market that is allowed, overpowering the State and Central Bank manipulation.

What we have learned in the past 13 years is the market can be suppressed and controlled forever by a dominant State and Central Bank. But markets cannot be suppressed forever, any more than risk can be eradicated, and so that lesson will have to be unlearned.

The spoiled teen can get through high school by cheating, but eventually he/she will have to navigate reality without the benefit of having learned anything except how to cheat.

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Shizzmoney's picture

Two words: "Glass Steagall"

Vampyroteuthis infernalis's picture

Why should the elites change their way of behaving when they continue to get richer and rest of us get poorer? They won't. The only way change will come about will be when their decades of mismanagement fails and it will.....

redpill's picture

What we need to learn is that there is one giant, magnificant lie that is the heart of central banking in the western world: that it exists to smooth out economic volatility and improve the lives of the citizenry.  This is utterly false.  Central banking in the western world, at it's core, exists to get people into debt, and to keep them in debt so that they pay as much in interest to the financial system as possible over the course of their lifetimes.  As long as we continue under the false impression that central bankers in the US and Europe are operating in our best interest we will be debt slaves.

Pladizow's picture

"We will learn an enormous amount in the very short term, quite a bit in the medium term and absolutely nothing in the long term." - Unknown to me.

Barbarians_R_Us's picture

I want to believe that. But its becoming apparent that nothing short of their heads on a pike will change these traitorous elites minds.


LFMayor's picture

I know people who, like myself, heartily endorse and applaud your curative.

midtowng's picture

I don't know why the article denounces cheating so much. Just look at the "winners" in society today: politicians, Wall Street bankers and traders, etc.

   They are ALL cheaters, and it has worked for them.

The only problem with cheating is that a whole society can't cheat. There always has to be a larger group of suckers than cheaters.

economics1996's picture

Shizz, Glass-Steagall was nothing more than the Democrats way of breaking up the Morgan Republicans.  It was a payback for the 1890 Sherman Anti Trust act that was designed to fuck with the Rockefeller empire.  Nothing more, nothing less. 

Repealing, or leaving in place Glass-Steagall, would not change a thing with the housing boom and bust. 


Because the housing boom and bust was created by artificially low interest rates created by the Federal Reserve.

If you want banking stability eliminate the Federal Reserve.

SAT 800's picture

You couldn't figure out that you were supposed to buy Ford at $3/share, on two to one margin? Why could you not figure this out? Is it not what is called obvious? It is what is called obvious; therefore nothing you have to say is worth listening to.

KingPin 999's picture

Anybody at Zerohedge watching the total ahnilation of the baltic dry index. Not the best indicator but this kind of move is saying something.

fonzannoon's picture

I am. Waiting for it to show up somewhere in earnings. Looks like I may be waiting a while.

youngman's picture

I have been watching...the excuse is a bunch of new ships.....well if thats true...they just killed themselves...but i think its more than that....less trade...but yet the Richmond Fed jumps....I am confused...

vocational tainee's picture

The index is at a low of 807, which is something we have not seen for years...

ucsbcanuck's picture

Try 784.

(sarc on)

Must be a lot of new ships out there

(sarc off)

TruthInSunshine's picture

People of earth will view this as a brilliant and prophetic documentary in 25 years:


Idiocracy - Trailer

Foreign titles will include Keynesianism Bastardized & Used By The Big Club (That You Ain't Part Of)


You Get The Government You Deserve, Devolved Mutants


For A Few Krugmans More


It Came From Chuck Schumer's District

Shocker's picture

Ouch, yeah that movie pretty much nails it. We are heading in that direction everyday.

This should be a required movie to watch, then people might say wow, let try can change things a little. You can laugh at the movie, but deep down inside and more like a horror film.

You see how there is only 1 major store, kinda a similarity of whats starting today.

TruthInSunshine's picture

It's already so much closer than we realize. Krugman & Soros are on a natural high. Krugman's fantasy of erasing all sovereign debt by printing an additional amount of tri-colored paper fiat equal to that owed to creditors can finally be implemented, and will be hailed as an economic/monetary miracle. The Krugman 10 million dollar bill:
Idiocracy Mash-up
Xkwisetly Paneful's picture

Thought the CROX touch in Idiocracy was brilliant.

digitlman's picture

Well played, Francis

francis_sawyer's picture

Thanks... Sorry I deleted it... (to those of you who missed it it was about 20 space bars of emptyness... But I decided in the end I'd better not hijack the thread space)...

And now it has 5 UP arrows... Help us out peeps... It's now morphed into a science experiment... How many UP arrows can one get from an original post that was completely blank (for 20 space bars), replaced by one with the word <deleted>...

We're rapidly approaching the crest of human innovation...


Goldilocks's picture

Blank (black) market, bitchez!

Cognitive Dissonance's picture

"If we learn nothing, then we deserve to lose."

We need to expand our perception beyond the simplistic paradigm of 'winning and losing' and ask ourselves if a game such as this should be considered the only way to play. We will act as if sheep only as long as we believe ourselves to be sheep.

Helpless mindless sheep are led to slaughter. Sovereign beings would never tolerate such a one sided equation.

Time to wake up Neo.  

alien-IQ's picture

How can we expect a generation of kids to grow up with any critical thinking capacity when we have a system of education, news media and entertainment that seemingly combine forces to suck the creative and critical soul right out of them and replace it with drone like servants of the status quo?

Our system, in it's current form, rewards conformity and punishes anything resembling original thought.

John Lennon captured this pretty well with the song "Working Class Hero"

"As soon as you're born they make you feel small By giving you no time instead of it all Till the pain is so big you feel nothing at all"

"There's room at the top they're telling you still But first you must learn how to smile as you kill If you want to be like the folks on the hill"

Xkwisetly Paneful's picture

MOhamed it is just so confusing.

Anywhere there is big government there is stifled creativity regardless of the education system.

The confusing part is the "we" and "our" part.

LFMayor's picture

first thing is we can stop using the prophetic, hidden meanings from songs by a bunch of drug addled counter culturists, sponging their livelyhood off othe the very population they so violently protested.

Now, Yellow Submarine, there's a teaching aide! 

francis_sawyer's picture

I've learned that it would be a good idea to make myself more heavily armed...

LFMayor's picture

this first, before all else.  Be Armed.

SAT 800's picture

You know what, you really are an idiot.

GeneMarchbanks's picture

'The spoiled teen can get through high school by cheating, but eventually he/she will have to navigate reality without the benefit of having learned anything except how to cheat.'

No cheating is necessary for high school students, only a pulse and attendance.

Learning from mistakes of the past thirteen years is small potatoes, you need to go back farther. Perhaps much farther and given the level of understanding that prevails in modern America, that is now no longer an option.

LawsofPhysics's picture

"The spoiled teen can get through high school by cheating, but eventually he/she will have to navigate reality without the benefit of having learned anything except how to cheat."


Yes, but ONE thing the financial sector has taught everyone is that it isn't "cheating" if you buy the politicians and change the laws.  Unfortunately, this greed and lack of prosecution of fraud (i.e. moral hazard) will destroy everything as there is and will always be a real cost for creating capital without adding real value to the system.  Hedge accordingly.

HD's picture

Yes, morality is for the unwashed masses - not for those "benevolent" masters of the universe who trickle down on the 99.9%

As Lloyd will tell you - they are doing God's work.

Caggge's picture

We learned we can't trust our political leaders to represent the people who hired them to represent them. They are self service cowards that couldn't survive completing in a real business without gaming the system.

JW n FL's picture



What Have We Learned In the Past 13 Years?

The Sheepeople have Learned NOTHING!

They have learned how to be just that much more ignorant of the World around them.

They have learned that they only want to know the News that is put into Heavy Rotation on Corporate owned News Outlets!

They can NOT! Handle the Truth!


InconvenientCounterParty's picture

It takes significant critical thinking to effectively "cheat". It's that critical thinking which creates more earning opportunity than the learning factoids alone. Point being, it's not all bad.

How to teach empathy between humans? Well, that's a little harder, but it's a worthwhile goal.

Bartanist's picture

I hear ya. Critical thinking = good.

When I think of cheating however, I envision a winner who cheated and a loser who was victimized by the cheater. For me, the negative effect on another would outweigh the positive effect of critical thinking (which under these circumstances seems to be simply a rationalization for allowing oneself to do something antisocial).

If good and evil exist then I see them as the reflection of our actions on others. In serving ourself are we harming others? In serving others are we harming ourselves?

LFMayor's picture

yes... only the foolish criminals get caught.  Or the greedy, which foolishly forget to factor risk/reward. 

Empathy can only come after security?

SheepDog-One's picture mean I cant buy stocks with the guarantee that I cant lose because surely I'll be bailed out?

A Lunatic's picture

I've learned that "winning", as defined by the status quo, is a losing proposition.

CH1's picture

Some of us have learned a lot in the past 13 years. Joe Corporate, however, is still hiding his head in the sand and lauding those who defend his denial.

Bay of Pigs's picture

Fraudulent bond market, fraudulent accounting, TBTF and regulatory capture.

Cheating? It's much, much worse than that...

falak pema's picture

One thing is clear : you don't go from outright hubris to outright lucidity and proactive humility; "fix it" mode, at the turn of a combustion engine car key. People and nation states are not like that; they take time to realize. Today we are still in denial. Its a long way to Tipperary and the war on hubris will run its natural course, like a raging river to appeasement, hopefully not to collective, irretrievable ruin.

Pasadena Phil's picture

We seem to have abandoned as a country our committment to the pursuit of efficiency that brings lasting benefits to the destructive forces of global expediency whose "benefits" are fleeting and only benefit a very few at the expense of the many. Not all "growth" is good. We have lost the "vision thing" since Reagan left the scene. How do we get it back?

Bartanist's picture

Not sure why people trashed your comment. However, I do not necessarily think that efficiency for efficienty's sake is beneficial because efficiency serves fewer people than inefficient and free markets/people/will. Efficiency often kills creativity.

My interpretation would be more along the lines of a "misallocation of resources" instead of an ineffective move toward efficiency.