The concept of fiat money and the concept of social intervention is a sweet lie, says Rick Rule, CEO of Sprott US Holdings Inc., in a conversation with Mike Maloney, as they discuss the reasons of the stock market crash.
"People would like to believe that they can consume beyond their ability to generate utility, as individuals, as corporations and as a country," Rule thinks.
It's nice to believe that there are these big thinkers - Obamas, Bernankes, Bushes, he explains. It's nice to believe that we had a problem in 2008 that was a mistake of liquidity, caused by some toxic mortgage, or something like that. Somewhere there was a pin that popped the balloon.
"And all these big thinkers fixed it, and we didn't have to worry about things like working, or saving, or creating, or producing. All we had to do is be consumers, we were a consumer-led economy. And if we just spend, never mind we have never had any money."
The reason why it has taken so long is because a lie is so attractive.
Markets are driven by people's near-term prospective - that is one thing Rule has learnt. People's expectations of the future is driven by their experience in the immediate past, and people appear to be not as free-thinking as you would suspect.
As people figured out the "big thinkers" have saved them several years ago, they may think the same will happen again if a similar crash takes place... Most people do not search for objective information, they rather look for something to prove comfortable paradigms.