A little history: The way our financial system is and has to be …

Jim Grant said a few months back in one of his Interest Rate Observer bi-weekly missives: “Humans are simply incapable of handling credit,” or something close to that.  We have seen the deleterious impact of easy money before.  And no matter the regulatory environment conjured up to keep it from happening again—it will. 

In perusing an excellent book titled, The Panic of 1907, penned by Robert Bruner and Sean Carr, I ran across this mini-postmortem on why it happened:

“The recounting of events of 1907 suggests that the storm gathers as follows.  It begins with a highly complex financial system, whose very complexity makes it difficult for anyone to know what might be going wrong; by definition, the multiple parts of the financial system are linked, which means that trouble in one institution, city, or region can

“The next Fourth Turning is due to begin shortly after the new millennium, midway through the Oh-Oh decade. Around the year 2005, a sudden spark will catalyze a Crisis mood. Remnants of the old social order will disintegrate. Political and economic trust will implode. Real hardship will beset the land, with severe distress that could involve questions of class, race, nation, and empire.”

– William Strauss and Neil Howe, The Fourth Turning, 1997

When IndyMac …