Mailbag: Bear Trader writes; Is the Government all knowing or helpless?

I am starting to see patterns in stocks and bonds markets again. Markets are way different than 1995 - 2000 or 2002 - 2007. Those two markets were way different from each other and from now. The biggest thing lately is the developing fear that the money printing and deficit spending are not going to work like we were promised they would back in Econ 101. The country is getting poorer fast and the the government seems helpless to fix it. My own understanding of this matter is the government is, indeed, helpless to fix things, and, even worse, government attempts to fix things by "investment" confuse spending money with investment. You cannot spend your way to riches. Neither can you borrow your way to prosperity. People talk about "take off speed". Ain't gonna happen until the existing bad debt is written off. This means the end of the "too big to fail" enterprises, the network of derivatives binding the Big Boys into one house of cards, etc. Somebody will have to take the losses, there is no other way than "wealth destruction". Right now that means the public takes the loss, and, though the process is running very slowly because of government action, we see the results everywhere. "The Rich" don't have anything like the wealth to take the fall by themselves either. The bad debt in the USA alone is about ten times the GDP. It has to be written off, this means "entitlements". Those on the dole will be kicked off, no choice, pal. Politician's promises like "free" health care, social security, etc. will fail big, because there simply is not enough wealth to pay off the promises. Right now the insurance industry is hopelessly insolvent, living on accounting that ignores the real situation (with government blessing). Is it any wonder that people who see this, and there are many, are trying hard to plan ahead and execute their plans in the hope of protecting their families? The really rich, those 5% of the US households who own 92% of US assets (same as 92% of private net worth) have been definitely expecting confiscation, but you know, not right this minute, maybe soon, but got it "under control"; Cypress was quite a shock for them. So you see the current market behavior, reflex move to defensive patterns, concern over probable loss of British offshore "tax havens" (Parliament is now arguing about outlawing corporations with anonymous stockholders and anonymous trusts; this would kill the currently easiest money shelters, Cook Islands, British Virgin Islands, Bermuda, leaving Andorra, Liechtenstein, and I don't know where else). It looks to me that the government does not understand money and hasn't for many years. A result of this is that those people cannot distinguish between wealth and displays of wealth, between wealth and acting like a drunken sailor with money in his wallet. Or like a politician trying to buy votes.