Finally the Truth is getting out about the Economy!
In his article "Putting the toothpaste back into the tube" by Andy Kessler on The Weekly Standard, we find a short and simple explanation of how our economy works - and what's been going wrong lately. As hinted by various commentators over the past couple of years, the problem has been leverage - unauthorized and uncontrolled:
A shadow banking system--Lehman, Bear Stearns, Merrill Lynch--was borrowing short-term in money markets at, say 2 percent, and instead of the classic 10:1 leverage of banks, they were levering up 30:1, sometimes 50:1, creating money out of thin air well beyond the intention of the Federal Reserve. It didn't show up in prices, mainly because of a huge and productive tech sector as well as the waves of cheap Chinese laborers who were providing cheap shoes and toys and furniture to Wal-Mart, "hiding" the over-creation of money. But it did create a shadow economy of home builders, linoleum layers, decorators, Home Depot Expo salesfolks, and on and on.
Folks: The above article is a must-read for those of us who are not in banking but still seriously want to understand what's been going on!