Aftershock: Protect Yourself and Profit In The Next Global Financial Meltdown, Second Edition

Is There Any Scenario for a Soft Landing?

Yes, but it would have had to occur many years ago, back when the government debt bubble was still under $1 trillion, and before the rise of the real estate bubble, the private debt bubble, and the stock market bubble. In other words, we could have created a softer landing for America’s multibubble economy back when the mother of all bubbles, the government debt bubble, was still manageable. Even when the bubbles grew larger, we still could have ended the problem, but with a not-so-soft landing. But at this point, now that the bubbles have grown so large and are so interconnected, the fall will be far, and the eventual landing will be anything but soft.

The Hamptons Effect

Rising bubbles created a rising bubble economy and plenty of bubble-money wealth. If you have a big, expensive house in the Hamptons, and a grand lifestyle to go with it, you are keenly aware that a collapse in the stock market, real estate market, and the other asset bubbles would mean an end to the good times you have come to think of as permanent. Naturally, that isn’t too appealing. Therefore, you have a powerful incentive not to see the bubbles or the bubble economy, and instead to believe in wishful thinking that assures you everything is, and will continue to be, all right.

We call this “The Hamptons Effect.” Wealthy people, stockbrokers, and asset managers have a deep need to keep believing we don’t have any bubbles and to keep investing in the stock market. ...