3. Even the wealthy have limited resource contraints, and they're also hitting those limits.
Edited on Sat Nov-05-11 11:15 AM by leveymg
There's only one way for them to go, and since they're now blowing up bubbles with public money (the last available bubble), when that bubble bursts there's no longer any support or a natural bottom for their overvalued assets prices. Without a natural bottom, they'll just keep sinking.
With the failure of the Wall Street system, which is a Ponzi, the productive assets will have to be reorganized into more sustainable forms that put people back to work, and finance will have to be largely nationalized. Holders of debts that were previously extremely overvalued and kept afloat by expectations of public bailouts(Krugman's term is "Pangloss Value") will take a huge haircut, and many financial intermediaries will probably not survive. The Wall Street dinosaurs will die of their own pollution and unsustainable excesses.
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