Two Years Ago, The Real Financial Bubble Burst

Excess causes financial catastrophes. Extreme crowd behavior is now called mass psychology. At auctions, two bidders battle beyond the item's reasonable value. It happens whenever a financial "craze" hits. The "dot-com" bubble illustrates.

Charles Mackay identified this mass psychology 180 years ago. Mackay's book describes how psychological fervor builds and people can't resist. They risk everything to "become rich."

This is a "Bubble" Bubble-wrapped, they're enticing. I remember a 1980s Beverly Hills "bubble." I remember this "Bubble" as The Pyramid.

Ponzi scheme, as explained. Gamblers pool funds. New speculators paid off old. Monthly pay for members.

Growing these schemes requires more and more gamblers. Lack of new gamblers causes the operation to fail. Until early gamblers get rich. As expected, late gamblers lose it all.

Ponzi scheme was invented by Charles Ponzi in the 19th century. Bernie Madoff ran a Ponzi fraud. Hoax $50 billion.

A financial disaster has 2 sides. Rubes "can't lose" They'll take and risk anything in the hope of winning.

Another dimension is con artist. The arrogant type. Accept their word since they're honorable. Madoff's only auditor was his son.

It's hard to recognize fraud now. Hard labor, audits, and an inquiry are needed. Madoff was always shady. But he was caught, like most scammers.

The "Madness of Crowds" mass psychology on the opposite side of the Bubble is unclear. There's a hint. Much is borrowed. Leverage is a good, but not perfect, indication of a Bubble. It's thought that easy money encourages gambling.

Americans seem to be turning away from gambling since the 2008 Financial Crisis. Americans now use 10% less leverage. The US is careful. Good sign that another "Bubble" won't come from the masses.

But our government isn't prudent. 2008 people owing 25% more than the government. Federal debt is 40% more than private debt. Nearly all of that rise came from the Pandemic, raising Washington's debt by a third in less than two quarters.

Fraud's reckless spending. Red flag: this spending pattern. Administration spending ignores budgetary checks and balances. They dodged financial controls and internal audits to spend swiftly.

In 2020's early months, audit controls likely laxed. Lack of time to use proper requisition procedures and audit trails. It was time to pay out.

When a financial Bubble bursts, the ramifications take time to show. New York's 1929 Stock Market Crash was an instant disaster, but the decline lasted years.

Bernie Madoff ran a long con. It took years for his "investors" to realize their loss.

The current financial crisis began in 2020. Wait for impact.


Typhoon Muifa targets the world's largest container port, Shanghai. Waves over 16 feet are expected tomorrow. Muifa is a big Typhoon, hence China is restricting infrastructure to reduce damage. Shanghai connects China to Los Angeles and Long Beach.

Wondered about Russian Sanctions? The EU and US sanctioned Russian Energy imports. The US cut off Russian oil and gas. The Financial Times says Gazprom's revenue has risen. From $53 to $100 billion. It's due to oil and gas prices. And why are prices higher? Bans.

The big news: Inflation decreased again. CPI rose 8.3% in August. It was slightly higher than Wall Street expected but in line with the economy. The Fed will raise rates by 0.75 percent on Wednesday.

Today, two firms announced earnings. Core and Main has pre-market results. While Viavi Solutions is up, they're just guiding.

The preceding is a summary of an article that originally appeared on INDEPENDENT SENTINEL.

Written by Staff Reports

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