Instead the US government has rolled back (and the world followed) Great Depression era accounting practices such as mark to market accounting to value assets. Instead we now have fantasy asset valuations. Combine that with a Credit Default Swap market that to this day remains unregulated, and the liabilities exceed global GDP by many times.
This concoction has created not a financial system, but rather a debt pretend and extend system, that one day, cannot be extended. Its like a huge Jenga game waiting for a collapse.
And here we are, with the stock markets rallied up over 100% from the 2009 lows, USD near its low, commodities over-valued. But real unemployment is over 17%, companies are not hiring, unemployment benefits are expiring after 2 years of payments.
When the US financial system deflated in September 2008-march 2009, the US was quick to re-inflate through accounting fraud and Federal Reserve Bank money games.
This time, it is looking like the next punch for the financial system will not come from the USA (initially) but it's a race between Europe and China. It doesn't matter which wins, for the other will quickly follow the leader, with the US taking 3rd place in the next collapse.
As such, the USD ironically will once again become the shining gold standard of investments, as the Euro shows to be fatally flawed, and China may experience a full blown revolution. It's obvious to everyone that the Arab nations are not safe havens, and the rest of the countries are either too small, too immature, or too corrupt to matter to the global financial community.
Lets take a look at the world's leading regions to lead the world into the Greatest Depression.
Europe - Greece leads the pack, as it defaults it will trigger a cascading failure among it to other nations, it may be a slow fuse, but it will be lit. To Germany's credit, they are lighting the fuse by taking a stand on the extend and pretend global mantra. Kudos to Germany, the only adult standing in the global financial system. How Ironic that after WW1 Germany's monetary games triggered hyperinflation, leading that country directly into WWII. Here we are Germany by refusing monetary games, may be triggering something akin to WWIII. While hopefully not an all out war, you can be sure that countries relationships will become frosty once the global credit collapse begins in earnest.
China - The grand plan that by awaking the Chinese economy, they can lead the world into an extended growth period is in trouble. I believe Ronald Reagan saw the demographic wall approaching the west, and that is one of the reasons why he opened relations with China. (aside from corporate obscene profits and ability to gut middle class america) But the Chinese demographic is a lure and a curse. For China has over 1 billion people, and if even 10% of the people become violently unhappy, that's over 100 million people to stir revolution. China has shown America how to exceed in extend and pretend games, and has built the worlds largest ponzi scheme, putting america to shame. Now, their country faces on multiple fronts pressures, initially stemming from natural resource prices rising. China is starting to have government protests in urban areas (historically in rural areas). Violent protests, bombings, and uncovering of international fraud is beginning.
USA - While the USA's problems by now are well known, top banks are insolvent but exist with extend and pretend, the newly issued liabilities are not known. If these banks were allowed to go bankrupt, they would have not had the ability to "double down" by taking even RISKIER liabilities. It just goes to show how far a junkie will go to continue a high. Amazingly, now these risks are indirectly the US governments liabilities. So while I place the US in 3rd place for the next implosion, the US does have the ability to race past others during the next downturn to take first place. This will be determined by political choices made with the private debt. For now, it is apparent that the recovery, or lack there of, is now on the downswing. Small businesses outlook dims combines with starlings of resource cost issues. The US economy is going "no were" fast.
The Federal Reserve Bank or IMF may announce a new extend and pretend game. It may buy time, but it will only make the eventual downturn worse.
So there you have it. I may actually already start buying DXD again, since the fuse for the next downturn is lit. It could be tomorrow, or 3 months from now when things start to accelerate. One thing I have learned since 2008, that people will do anything, ANYTHING, and EVERYTHING to avoid doing the right thing. Extend and pretend will always be chosen until that choice is removed by force.