When risk factored returns are examined around the world, there is a very evident pattern. Without the application of excessive leverage, returns are consistently seen to be wanting. Unrecognized, ignored or ineffectively hedged risk is being being assumed to achieve marginal returns.

Moral Hazard and Unintended Consequences due to Monetary Malpractice has left the world with dysfunctional financial markets that are now broadly mis-priced and overwhelmingly in the Austrian camp of mal-investments. This leaves them exposed to a market clearing event that will reset the value equation. Insolvency is presently running rampant, but hidden by regualtory forebearance, archaic balance sheet accounting and the shear fear of contagion associated with almost any major bankruptsy.

Charles Hugh Smith and Gordon T Long discuss the underlying issues, liquidity versus solveny and how a moral malady has become interwined with current monetary malpractice.