FINANCIAL HURRICANES HAVE TWO EYE WALLS

Complacency got a wake up call on Thursday. But will the 1000-point intra-day drop on Wall Street bounce off of complacency without education taking place?

We are dealing with a financial hurricane. The first half of the storm hit us hard in late 2008 when the banks hit the wall and deleveraging in the private sector led to a form of gravity rarely seen on planet Earth.

Next came the eye of the storm with its calm winds and tranquil blue skies. The eye is formed by a combination of money printing and propaganda. Well, that wasn't so bad. After all, Wall Street and the Federal Government are telling us we're in a recovery. And we believe what the authorities tell us. I guess the trillions in bailouts for the criminals must have worked. Everything is going to be all right.

But a hurricane is a two-sided animal. Just when you think it's safe to go out and party again, the second eye wall hits with a vengeance. Only this time it's public deleveraging coming at us. Greece is but a brief gust of wind. Think Spain, Portugal, Italy, Ireland, Great Britain and Japan. And then there's China whose real estate bubble is searching gamely for a pin. If it finds one, better get into your bunkers

Thank God for the good old USA, right? Wrong. Just compare inconsequential Greece to California, the seventh largest economy in the world. California is broke. So is New York, Illinois and New Jersey. Europe has its broken states, so does America. Our municipalities, our states and the Federal Government itself are bankrupt. All of the parts of the global storm will have to be bailed out with freshly minted pieces of paper. And as for the U.S. Government, it's inflate or die.

So let's hope that complacency learns a lesson from Thursday's stock market. When the hurricane finishes its business with Europe, it has the United States squarely in its sights. So batten down the hatches and do what you must to protect yourself from what's coming down the road.