Observers such as legendary fund manager Mohamed El Erian believe that the financial crisis has precipitated a sea change that will take the West to a ‘new normal.’ That would be a problem. Meanwhile, however, Wall Street has returned to the Old Normal and is on track to reach record levels of compensation this year.
Latest figures from the Bank of International Settlements: $8.3 trillion of real money is controlling $313 trillion in derivatives. That's 38 to 1 leverage. If there's a fire-sale in hedge funds or derivatives, there's nothing the Plunge Protection Team or the Federal Reserve will be able to do to stop a meltdown. The market will crash leaving nothing behind.
What does it take to drive grandmothers into the streets in protest to be whipped and trampled by mounted police? If you know anyone from Argentina you'll get an answer. It is said that history has a way of repeating itself. People in the United States will do well to understand Argentina's banking failure in December 2001.