What a wonderful time to be alive! Never has it been easier to feel superior to our fellow man! So many dopey ideas…so many preposterous delusions! So many fools…so eager to part ways with their money!

We have to pinch ourselves occasionally…and remind ourselves that it is real.

Yes, after the real estate bubble burst, we thought the fun might be over. But no! In come the feds. As you know, what brought about the housing bubble was a sort of madness that caused people to do the damnedest things with their money. But now, the feds are doing even stranger and crazier things!

Actually, we were happy to see the bubble blow up. Spending more than you make is hardly a formula for wealth-building. All in all, we figured our countrymen would be happier, over the long run, if they started saving their money rather than squandering it. Besides, we liked seeing

div align=”justify”Policy makers are trying to cut through the Gordian Knot that is this banking crisis with rusty nailclippers rather than wielding a very sharp sword. The financial collapse that has engulfed the world economy can seem overwhemingly complex, but in essence it boils down to two interacting financial theories that were tested to destruction.emstrong The first was that securitization, the slicing and dicing of individual asset risk at any given bank to be parcelled up and sold on/strong/em, would lead to a more stable financial system by limiting the balance sheet concentration and hence vulnerability to external shocks of each institution. Risk was to be scattered to the four winds. strongemThat neat idea ignored the systemic risks that ensued if most institutions lent recklessly/em/strong on the assumption that their individual credit downside had been ‘outsourced’ to a seemingly bottomless pool of anonymous global investors. emstrongThe second was that emerging …

Never before have I learned so much so quickly from my readers as I have now — all just by reading the thousands of comments you have posted on my blog in the past week!

One of your key questions: Will the new Obama stimulus and banking bailouts succeed or fail?

What will be the immediate and ultimate consequences?

What should I do?

Today’s gala edition is my response.

But let’s not waste time digging for causes — the economic blunders of Washington, the financial greed of Wall Street, or the big debts and risky bets by almost everyone.

Let’s also not waste time pointing fingers — the Clinton administration for creating the tech bubble, the Bush administration for creating the housing bubble, or the Obama administration …

A few weeks ago, when the U.S. Federal Reserve announced a strategy designed to bring down long-term interest and home mortgage rates through unlimited Treasury bond purchases, government debt staged a spectacular rally.

To the unschooled market observer, the spike may be difficult to understand. After all, why would the value of U.S. Treasury bonds rise while their underlying credit quality is deteriorating faster than Bernie Madoff’s social schedule? The move is actually a perfect illustration of the tried and true Wall Street strategy of “buy the rumor and sell the fact.”

If it is well known that the Fed will be a big purchaser of Treasuries, those buying now will be positioned to unload their holdings when the buying spree begins. If the Fed pays higher prices in the future, traders can earn riskless speculative profits. If the traders lever up their positions, as many are likely doing, even