It's All Monopoly Money

This is a little old, but I really think people should read this interview with Margret Atwood on Marketplace, she hits the nail on the head.

Atwood: OK, here we go: 'I knew from fairy tales such as "Peter Pan" that if you ceased to believe in fairies, they would drop dead. If I stopped believing in banks, would they too expire? The adult view was that fairies were unreal and banks were real, but was that true?'

Vigeland: And did you find an answer?

Atwood: The answer is that money and banks and all of these kinds of institutions that we have built up, they're all human inventions. Money is really just a sort of Monopoly token. It's not good for anything: you can't wear it, you can't eat it, you can't smoke it. Similarly with banks. Part of our belief in banks is that they're safe. If we stop believing they're safe, the bank actually vanishes because nobody will do business with it or put money into it. Wouldn't you say that's true?

The economy is based on trust and once that trust is violated it begins to unwind. We're are still in the process of unwinding. There is also an interesting article from the motley fool describing the uncoupling of the Chinese economy from the US economy.