There is an overwhelming sense of uneasiness felt by many today regarding the state of financial affairs.

Micro level

On an individual level, diversified resources, varied skill sets, strong work ethic, financial background and current financial stability are the basis for success.

An individual who does not carry all their eggs in one basket, is not indebted or has very limited debt exposure, is capable of generating income by supplying diffferent skill sets, comes from a wealthy family or has a well established financial position will ineveitably be relatively successful regardless of the state of the financial environment in which they live.

These combined attributes ensure a degree of success since the combination of some wealth and hardworking valued skills never become obsolete.

Macro level

Essentially whats good for the goose is good for the whole flock, however at a macro level there is one attribute that outweighs the others in importance which although useful at the micro level is not able to dictate security the way it does at the Macro level.

That attribute is reputation and that inspires CONFIDENCE.

The USA has inspired great confidence over time and have demonstrated resilience in recovering from past financial crisis. Back in 1971 (for it is then that the currency of the USA became separated from gold reserves) the world's confidence in the economic state of the USA was sufficient to accept their currency as the standard medium of exchange for the entire world. Nothing other than the reputation of the nations ability to generate wealth was needed for the entire world to accept otherwise worthless paper in exchange for the real goods and service desired for living. Now that is CONFIDENCE.

The USA was not without warts at that time, in fact some would argue that those warts became cancerous at that time and many would now say that the cancer is widespread and terminal.

The current administration is doing everything in their power to re-inspire confidence that the events of the preceeding year plus was not the gestation period for complete financial collapse, but rather an aberation from what otherwise is a healthy system which was caught up in a liqudity crisis originally caused by some questionable mortages and complex financial products called derivatives.

The government would have us believe that this "sudden" cash crunch for otherwise healthy companies excluding the banks whose assets remain in question to this day was the cause of a recession and that there was some excesses (inventory being one) in the housing and auto industry. Initially the importance of the auto industry was of such a nature that a bailout was warranted and since the issue of purchasing a car without a warranty was so frightening to consumers it was argued the auto companies could not be allowed to fail.

As media attention became focussed less on the financial institutions and more on the auto companies, the nature of the problem changed. Those behemoth auto suppliers were no longer competitive and had an unsustainable cost structure which may necessitate "controlled bankruptcy" and government assurances about protection of auto warranty (I'm not sure why it took so long to figure out how to put warranty holder's at the top of the foodchain by insisting on an adequate reserve provided through cash from the auto companies and dealers or the taxpayers had they entered chapter 11, but that is another story).

Where are we today?

The collapse just over a year ago of Bear Stearns which evidently came as a "complete and sudden surprise" to just about everyone, employees, regulators, government officials (forgot to mention other banks did know they would be unable to pay) and we had the birth of the "liquidity crisis".

Helpful definitions:

Derivatives: a complex (not even understood by most "experts") financial instrument in which numerous large financial institutions had previously attained enormous paper profits (worthy of generous bonuses to executives whi have the CONFIDENCE to live exorbitant lifestyles) which may actually turn out to be "weapons of financial destruction"

Liquidity crisis ... Loss of CONFIDENCE in the ability for massive financial institutions using complex investments to return borrowed money on an industry wide level.

Bailout: the use of taxpayer money to avoid business collapse which could cause a loss of CONFIDENCE in the economy and government both internally and to other countries.

Mark to market: a traditional method of accounting based upon the principle of conservatism to inspire CONFIDENCE, whereby financial institutions are required to value their assets (financial instruments, I.E. Loans, Investments) at the going price of the market. (if no one wants to buy the loan of an individual or a company .i.e. GM for even $.01) the financial institution is obliged to say that "asset's" value is zero

Stimulus spending: Since the country is already in debt borrowing against the future earning ability of the countries citizens who generate the country's GDP so that financial problems today can either be solved or be hidden to avoid a loss of CONFIDENCE.

Transparency: an excellent theory applicable when those in control deem it will not cause a loss of CONFIDENCE

Government strategy: Do whatever it takes to manage market sentiment such that citizens of the countries CONFIDENCE (whose welfare may be compromised in both in the short and long run) remains strong and hence they spend money (they may not have) on mass to inspire the CONFIDENCE in the internation community that all is well with the USA.

Government integrity: I'll let you define that

THE QUESTION REMAINS

How CONFIDENT are you

at a micro level - in which you will need to depend upon your skill sets and resources.

at a macro level - in which you will need to depend upon the skill sets and integrity of your Government and leaders to manage the collective resourcesof you and the other citizens.

the prophet