The name Empty Jacket comes from Judo of old. Simply, when one tries to wrestle an old yet true teacher, so the saying goes, "it is like trying to wrestle an empty jacket". Though young, fast, supple, and incredibly strong, the Judoka does not seem to be able to even touch his older teacher, let alone throw him. Indeed, the teacher seems to be able to throw the youngster at will, with little speed and even less effort. Through a lifetime of practice, the old teacher has mastered the art of quietly summarizing the moment within the tempest of rapidly changing movement and uses such to simple advantage. The true master understands without even knowing the how of it because he has long since forgotten and no longer cares. Thus it is that if one is to learn, the wisest do not always make the best teachers. Indeed, to seek the truth in any matter the discerning student visits many teachers.
Today, the entire financial system turns the concept of the wise Empty Jacket on its head. Instead, you could say that while the jacket looks good on the outside, there is nothing at all of substance on the inside. No wisdom is necessary for nothing is there to understand. Rather, the man outside looking in and the man inside looking out are both fools.
So, what on earth has been going on? The housing market (USA, Europe, elsewhere) has been trying to crash since the summer of 2006. The fallout impacted financial markets beginning summer 2007. Lehman Bros. collapsed and the US government stepped in to save the rest. Since then, US unemployment has been rising by half a million a month (as of 2009) with no sign of recovery forthcoming. Then to cap it all, the politicians pulled their 'confidence' trick with the term jobless recovery. Are we really that stupid? Well, they certainly think we are.
As unemployment rises, production will decrease. Strangely, GDP in the US actually grew a little during the last quarter of 2009, which really goes to show how much money the government must have been pumping in. In fact, the government's plan, if it can be called a plan, is to pump the ocean into the ship to stop it sinking. The more ocean you get in there, the less it will sink because the closer to the bottom you must be. Well, according to the theory anyway. Trouble is, the ship is overflowing with money and this will only lead to inflation.
Over the next few years the US government is going to own more and more of corporate America and its modes of production. Wall Street has already lost a lot of its market risk factor and this trend will accelerate, encompassing more and more unstable corporations that should fail, yet for reason of pleading to be saved by friends in congress or banks, will not be allowed to. Any gains will only be temporary; as production becomes more inefficient the decline will continue and the average joe will simply stop spending, not because he wants to, but because he has maxed out his numerous credit cards and has no job and no more money to spend. Worse, there will be less to buy on the shelf.
The vast majority of people think that it is good for governments of the world to bail out the banks and big corporations. What they fail to understand is that governments do not know how to run these companies efficiently. When governments give cheap loans to students, for example, university fees increase. When government pays for medicine, medicine soon becomes more expensive because the government does not know how to drive a bargain. Think - LASIK eye surgery has become cheaper over the years because government is not involved - the market works. And yet, the surprising thing is that people actually blame free market capitalism for causing the crisis. Nothing could be further from the truth - the reason we are in this mess in the first place is because free market principles have not been allowed to operate.
To get out of this mess, all the governments of the world have to do is exactly, ... nothing. Free markets rule OK. Bubbles are supposed to burst and inefficient banks and corporations are supposed to go bust and get bought out by the smarter kids on the block who will invigorate them with new energy and make them more efficient. Those that praise trillion dollar stimuli only do so because it is their own pockets that are being lined.
What to do? Rich people will buy gold; the middle class will buy silver; the poor will buy food. If the situation gets really bad it is not hard to imagine people trading food for lead (ammunition).