The Grand Illusion Continues

A number of announcements were made by Central Banks and others and confirmed that government leaders and Central Banks "Will Do Whatever It Takes" to avoid an economic collapse.  Wait just a minute; Prevent?  Today marks the four year anniversary of the Lehman Brothers/Bear Stearns collapse and "The Great Recession of 2008".  For most people, it has been a long and painful experience.  As a number of my business associates already know, the economic collapse was not avoided and has continued.

What we have now is a "Virtual Economy" not a "Real Economy".  Video game players should know that a number of computer programmers can create a "virtual world" in which you explore, fight, and conquer enemy's. The Fed and the governments around the world have created a similar game called the "Virtual Economy" and left the "Real Economy" in shambles. Let me explain: 

What has always been the reality depends on which side you are on. You are either in The Have Camp or Have Not Camp.  In the Have camp (or virtual reality economy), the outlook is bright as bond prices, mortgage backed securities, and the stock indexes have rebounded on trillions of dollars of capital market purchases by Central banks/Governments that have propped up asset prices. The Virtual Economy has rebounded and wealth has returned to the Have Camp.
 
In the Have Not Camp (or the real economy), the majority of citizens have been left to fend off the collapsing housing prices, lack of jobs/high unemployment, and soaring food/gasoline prices as the "Real Economy" remains in a depression.

Just what is the end game here?  Will the "Virtual Economy" players come out of their world and back to the "Real Economy", or will citizens around the world be drawn into the new "Virtual Economy Bubble Game"?  After all, virtual games are fun for the winners! However, in the Virtual Economy will need more players, or the Central Banks will need to print more money since the "Real Economy" has none. In the Virtual Economy game, the rules are that Government's and Central Banks issue bonds or the Central Banks print money to replace "Real Money". 

The disconnect between the economy and the capital markets is as wide as I have ever seen it. The difference between the "Virtual Economy" and the "Real Economy" is frightening to me as the game continues. 

When will the Have Camp come out of the "Virtual Reality Economy" and realize that it is just a crazy game that cannot be won? The virtual economy game cannot be won by the Have Camp, unless new players are drawn into the bubble.

The real game here is called a Ponzi scheme. Please don't fall for the new bubbles being created in the "Virtual Economy" or we may end up like Lehman Brothers or Bear Stearns who ended up being in the Have Not Camp. Sorry, the game is over. Time to come back to reality!