Excerpted from the September 30 edition of Notes From the Rabbit Hole:

I often refer back to my first publicly written article (FrankenMarket Lives, 2004) because it simply stated the terms by which the stock market lives here in the age of Inflation on Demand, which was kicked off by Alan Greenspan in 2001 and is ever more aggressively managed to this day by his successor, Ben Bernanke.

From the article's opening segment: "As we enter the summer of 2004 [fall of 2012], our markets appear to be moving with all the grace of Dr. Frankenstein's creation, staggering forward, arms outstretched and seeking sanctuary [i.e. inflation]."

From the ending segment: "This market was stitched together with debt, and it will require more of the same to keep it going."

This is why risk is so high for bears, as it is for bulls. The stock market is running on lust for easy monetary policy, which these days does not simply mean that authorities seek to maintain accommodative interest rates but rather, that they seek to destroy prudent savers and risk managers, forcing everyone into the pool - a cesspool of putrid, rotting things that died on the vine long ago - of speculation. The nation's seed corn is in that sewage as well. It is 'all or nothing' and there is ample risk to go around for everybody.

FrankenMarket was fed a heaping helping of unsound and inflationary monetary policy at the last FOMC meeting.

Buying un-payable legacy debt with newly printed money is nothing if not intensely inflationary. Here I will ask that readers not automatically think 'inflation=rising asset prices', because inflation also equals moral hazard, booms and busts, economic burdens and diminishing returns. In other words, deflationary liquidations become part of an inflationary regime. There is nothing smooth and sustainable about a seemingly bullish environment brought about by money printing.

Here we have FrankenMarket - now eight years on - still being stitched together with ever more exponential layers of debt seeking more of what has held it together post-2008. When the original article was written in 2004, I never imagined the inflationary situation could take this long to resolve and indeed it did not; phase 1 of FrankenMarket - Alan Greenspan's phase - was resolved but good in 2008.

Phase 2 has simply amplified the hazards and exponentially increased the risks; not of a bear market or even a temporary liquidation like 2008. Phase 2 - being 'all or nothing' - has increased the risk of the end of the system. This is the only reason I can think of that policy makers have gone all in, despite a stock market near post-2008 highs and a 'jobs' picture that while still depressed, has basically stopped degrading.

We can drop any pretense that our economy is about anything other than the ability of policy makers to leverage the world's reserve paper currency toward asset propping ends. The investor class is favored and the working and lower middle classes - along with Granny and her Treasury bond income - are collateral damage. In fact Granny may be in junk bonds by now at the advice of her smart, young financial adviser who found her some really nice return.

We are all speculators now. Get used to it. We were once a nation of workers, savers and builders. We should not blame policy makers for this because they are just the dim-bulb extension of our own fading inner light.

I often used the word "hubris" in early writing because the main threat was not the evil Greenspan or the dangerous Bernanke (he of the famous 2002 speech "Why It Will Not Happen Here"), but rather our own apathy as a people (and Europe, here we include you as well along with most of the developed and modern world). But in America especially, a sense of entitlement that accompanied the 60" Flat Panels and 4,000 s.f. McMansions bought on credit showed a society that had forgotten the faces of its hard working fathers and mothers.

We have gotten the financial system we deserved and we have gotten the government we deserved. Not enough of us used critical thinking to speak out against the trends that have been in place since Greenspan engaged the age of Inflation on Demand. What we did was sit back, make 'coin' off of the bastardization of the currency and lever up. All the while the mainstream financial media and financial services industry drone on about earnings, valuations and other conventional stuff.

The monster popped its stitches in 2008 and the Fed has sewn the thing back up again. If they vacuum up enough sludge and pump enough money we may see the final destruction of the bears as the prices of things gain traction. But with the risk of inflation-fueled price increases comes the increased risk that all of this leverage will fail into liquidation.

That's our market, and eight years on it still lives. Risk management is our number one job, not gold stock investing, regular stock trading or conventional thinking. Risk management against all possibilities. Now, post-FOMC QE panic, NFTRH tightens up the focus because we stand to make some serious gains and lose some serious capital perhaps all within shorter time cycles than ever before because leverage has gone exponential in the interest of keeping FrankenMarket's stitching from coming unwound again.