Many have noted that the banks and financiers have learned a few big lessons from the Government bailout – that it’s good to be “too big to fail,” and that it pays to privatize profit and socialize risk.
The bailout has also taught a broader lesson to the American populace, well articulated by Seth Klaman, a legendary investor:
“We didn’t get the value out of this crisis that we should have. For our parents or grandparents, it was awful to have had a Great Depression. But it was in some ways helpful to carry a Depression mentality throughout their later lives, because it meant they were thrifty with their money and prudent in their investment decisions.” He added: “All we got out of this crisis was a Really Bad Couple of Weeks mentality.”
Klaman is VERY VERY worried:
“I am more worried about the world, more broadly, than I ever have been in my career…. The government is now in the business of giving bad advice. By holding interest rates at zero, the government is basically tricking the population into going long on just about every kind of security except cash, at the price of almost certainly not getting an adequate return for the risks they are running. People can’t stand earning 0% on their money, so the government is forcing everyone in the investing public to speculate.”
His advice – don’t get fooled again. Read the whole thing – and be very worried.